Outsourcing optimize

Outsourcing: Why does the hostility persist as new deals emerge?

Signs that outsourcing activity is on the rise may do little to dispel the animosity it sometimes attracts.

Negative attitudes to outsourcing continue to surface but one expert says they remain out of step with the realities of IT, which is experiencing a surge in deals as economies recover from recession.

Recent figures from the ISG Outsourcing Index, which tracks commercial contracts with an annual value of €4m ($5.5m) and above, showed record quarterly IT outsourcing deals for the EMEA region.

"The negative press outsourcing sometimes receives, which is tiny in comparison to the amount that's done in reality, is invariably around how it's ineffectively delivered," ISG North Europe partner and president John Keppel said.

"They often blame outsourcing but it's just a mode of operation - it's not a big hairy thing."

According to Keppel, much of the criticism aimed at outsourcing focuses on its effectiveness as a vehicle for change in an organisation.

"In a lot of those cases where it's suggested that it's ineffective it's often because the relationship, the contracts and the commercial elements are just not being managed very effectively," he said.

Record outsourcing contracts

Although the ISG figures revealed a record number of EMEA contracts awarded in the third quarter - 176 contracts worth €2.8bn ($3.8bn) - the sums spent on outsourcing globally in 2013 are still 20 percent down on a year ago.

The value of renegotiated deals also rose significantly on the previous quarter – up 200 percent – but showed only a marginal increase on the same point last year.

"The criticism is fair enough. Outsourcing shouldn't be immune to it. But it's not like it's going to change. It's a perfectly legitimate component of most organisations - there are very few organisations that don't do it," Keppel said.

"There are a few that don't do much of it. But there are few that very specifically don't do it in IT."

Sourcing specialist ISG works with some of the organisations in this category, Keppel said.

"For instance, one the most well known serial insourcers is HSBC, which traditionally don't outsource because they feel they've got IT scale, which they have, and they feel they can manage it effectively, which they do," he said.

"But for years now we've done global benchmarking work with HSBC all over the world to make sure that we can tell them exactly where in the IT estate they've got trapped costs. That's all a service provider would be doing.

"They manage it themselves and they don't think that a provider could really give them anything that they haven't already got."


About

Toby Wolpe is a senior reporter at TechRepublic in London. He started in technology journalism when the Apple II was state of the art.

5 comments
Marcus Waters
Marcus Waters

As a merchant, the is a immediate bump in profits and saving are overwheling, its like a titanic wave of opportunity, but at the end it hurts America at its core, we are one people, we comsume ourselves.

Erick Lawler
Erick Lawler

being treated (poorly) like hired help but expected to be the happiest and most skilled in the universe

Stephen Black
Stephen Black

It's a hideous concept driven by greed that tells indigenous workers that they are of no value because they want a decent wage. Outsourcing is a fast and easy cop out that gives executives instant gratification, rather than investing in and making vested partners out of employees.

Michael Berg
Michael Berg

Poor management of projects, employing purely for purpose of planned objectives....no real motivation in outsourcing for wanting more than just to be paid. Narrow vested interest scope is undoing what it means to work with and for an organisation....defies human requirements not met through outsourcing