Companies don't know the cost of outsourcing

23 February 2007
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23 February 2007 | Paul Snell

More than three quarters of companies are unaware how much an outsourcing provider costs, according to a survey.

The study, by professional services firm KPMG, said few businesses were able to measure how much the time spent on the selection process would cost them.

It also found that 50 per cent of companies took more than six months to select an outsourcing provider. A further 30 per cent spent more than nine months. Yet nearly half of all respondents said they could have predicted most or all of the short-listed providers from the start. "Why undertake a lengthy selection process if the outcome was known from the start?" the report said.

It added: "Improving the efficiency and effectiveness of the procurement process is critical for every organisation. If the process of sourcing the outsourcer is costly, protracted, inefficient or not aligned to meet the business requirements, the sourcing initiative may fail from the outset."

The study also found that 72 per cent of companies had no, or did not share with providers, any criteria for measuring the success or failure of their outsourcing deal. But most organisations said they were happy with their outsourcing relationships and 89 per cent aimed to keep them at their current level, or expand them.

The survey questioned more the 650 companies worldwide. Nearly half had a turnover of more than $1 billion (£510 million).



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