Calling a Change in the Outsourcing Market

4 Jun ’05

In April Deloitte Consulting released a report on outsourcing that calls into question some of the claimed benefits. From the executive summary:

The world’s largest companies have engaged in outsourcing for a variety of reasons: to reduce costs, expand capabilities, and increase flexibility. However, contrary to the optimistic portrayal of outsourcing by vendors and the marketplace, outsourcing is an extraordinarily complex process and the anticipated benefits often fail to materialize.

Organizations have now begun to recognize the real costs and inherent risks of outsourcing. Instead of simplifying operations, outsourcing often introduces complexity, increased cost, and friction into the value chain, requiring more senior management attention and deeper management skills than anticipated. In addition, outsourcing has allowed organizations to transfer financial and operational risk to vendors, but organizations are discovering that their contracts will never fully protect them against customer damage and business losses caused by service disruption. Many have responded by bringing operations back in-house and by exploring alternatives to traditional outsourcing, such as the Transform-Operate-Transfer model.

Much more in the report. Bruce MacEwen also has a short summary of the report on his blog.

Some months ago I blogged some other resources challenging the efficacy of tech support and customer service outsourcing.

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