When companies make the decision to outsource — or they have already outsourced — they often ask the question, Why benchmark? They are confident that outsourcing will save them money, or they know they are already paying less for outsourcing than their internal operations cost. So what is the value of benchmarking?
The benefits of outsourcing traditionally have been described in financial terms. With progress, however, cost reduction benefits have become ‘table stakes’ as even more significant advantages are realized from outsourcing partnerships. Leading organizations have discovered that in addition to cost benefits, outsourcing presents an opportunity to improve the level of service.
There’s a high rate of dissatisfaction among customers with IT outsourcing agreements, according to recent surveys by Deloitte & Touche, Coopers & Lybrand, and others. However, that dissatisfaction appears to signal the industry’s growing pains rather than its demise. The outsourcing market has continued to grow, enjoying a 15 percent to 20 percent annual growth rate for several years.
Are you getting ready to negotiate an outsourcing contract? If so, place flexibility high on the list of negotiation goals. Many customers involved in long-term outsourcing contracts in the past have learned the hard way that the restrictive and static nature of normal contract terms can tie their hands in the rapidly changing outsourced IT environment.
The European Theater is primed and ready for growth in Information Technology (IT) outsourcing. Total European IT outsourcing is estimated at around $15 billion in 1997, and with firms fueled by the need to concentrate on their core competencies, that figure is expected to rise to around $27 billion in 2001.
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