'Complacent' IT deals are fraught with error

26 April 2006
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27 April 2006 | Anusha Bradley

A mature IT outsourcing market may be "lulling people into a false sense of security," and putting their deals at risk, according to an outsourcing expert.

This view from Ron Jarman, Reuters' head of global sourcing, follows the publication of a study from PA Consulting. It concluded that purchasers and suppliers are still making "basic but far-reaching errors" which can lead to the failure of deals.

Understanding misunderstanding quizzed 300 firms and interviewed 29 major outsourcing suppliers and 17 law firms worldwide.

It found 58 per cent of clients carried out no due diligence on potential suppliers, 44 per cent admitted to underestimating the effort involved in managing their supplier and half of the lawyers believed less than 10 per cent of their clients understood what partnership meant.

Jarman, who has been involved in numerous outsourcing deals and took part in the survey, told SM it was "most worrying" that half of the firms questioned did not carry out any due diligence on suppliers.

"Most procurement people would not consider a contract for any goods or services without checking their suppliers first. We may have been lulled into a false sense of security, being in a mature market."

Meanwhile, a study by outsourcing adviser TPI said outsourcing a function saves on average only 15 per cent, once severance pay and professional fees are taken into account. See News focus


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