Outsourcing losing its lustre as projects come home

Outsourcing losing its lustre as projects come home

Very few organizations have realized the benefits of outsourcing with companies now returning projects back in-house, according to a new study by Deloitte Consulting.

The study, Calling a Change in the Outsourcing Model, surveyed 25 large organizations with combined outsourcing contracts valued at $US50 billion.

A whopping 70 percent reported negative outsourcing experiences and many companies are now taking a more cautious approach to future projects.

Even more drastic is that the study found 25 percent of respondent companies have taken outsourced functions back in-house with nearly half claiming the practice hasn't delivered the cost savings anticipated.

"Outsourcing as we know it will increasingly lose lustre," the report concludes.

For outsourcing to really make sense and deliver savings, Deloitte senior strategy principal Ken Landis said companies need to be far more strategic.

Management can also be a big problem, the study found, with 62 percent of the companies surveyed saying that outsourcing was a larger management drain than expected.

Batey Red Cell IT manager Henry Tam admits he has come up against trouble when outsourcing.

"When we outsource we have a dilemma. We have several systems but often the people we have outsourced the work to only know one system," Tam said.

"So we don't outsource anymore; I only rely on individuals that I already know and trust to help."

Tam said security is also problematic, a concern shared by Horwath support and operational service manager David Wood.

"I certainly think there are some issues with outsourcing, like security and quality of service," Wood said.

"Plus, I think some inherent knowledge needs to be maintained. If outsourcing is taking place you don't know whether that knowledge is being kept up to date and maintained; when you bring it back in-house you may find that you now have no knowledge pool at all."

To avoid this, Wood doesn't outsource at all preferring to keep everything in-house where he can keep a close watch.

ACI Glass Packaging IT manager Michael McNeil also chooses not to outsource and claims he wouldn't even consider it.

"How are people from the outside ever going to really know your business?" McNeil asked.

"Perhaps if you're outsourcing everything to one company and you're dealing with the same one or two people it might work, but here we're in an industrialized environment and there's no way an outside person would get to know our systems as well as we do."

However, outsourcing is front of mind for Air International CIO Terry Nye who is currently considering making the move.

"At the moment we tend to manage our own stuff, though it's something we're looking at. But then again, you do hear a lot of stories about outsourcing," Nye said.

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