One third of outsourcing deals end early

12 February 2008
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12 February 2008 | Paul Snell

A high proportion of outsourcing contracts are concluded prematurely, a survey has found.

A study by the US-based Diamond Management and Technology Consultants found that a third of buyers had terminated an outsourcing contract prematurely during 2007.

A lack of cost savings was the primary motivation for the contract truncations, according to the survey of 185 outsourcing buyers worldwide. But suppliers believe a change in strategy, or moving a function back in house are the main causes of termination.

"A disconnect exists between buyers and providers regarding why organisations are prematurely ending contracts, and this can lead to a lot of finger-pointing," said Tom Weakland, managing partner of Diamond's Global Sourcing practice. "The smart providers are the ones that are really trying to recognise the core causes of customer dissatisfaction rather than always trying to blame someone else."

The consultancy also found just over half of buyers were satisfied with their outsourcing relationships. The highest satisfaction was found among those who outsource customer service functions onshore, with the lowest being with those buyers who outsource HR functions abroad.

SMfeb2008

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