Placing too much emphasis on cost reduction can lead to dissatisfaction because the savings are either unsustainable or never achieved, says Gartner analyst, Linda Cohen.
This is because the economy of scale and cash injection benefits from outsourcing often disappear after the first year of the contract.
"You can only expect to receive that cash infusion once; by the second or third year, those 'economies' are forgotten about, the people originally involved have moved on and all too often the value of the relationship begins to wane," said Cohen.
The falling cost of technology and services also means some long-term infrastructure outsourcing contracts lock companies into higher prices than what could be achieved in a contract negotiation today.
Gartner said the more realistic goals for outsourcing are: to control cost over time and enhance the IT department's ability to budget, to provide access to specialized skills and resources, to enable the internal IT organization to focus on core mission-critical and business-differentiating services, to improve service delivery, and to gain access to scalability.
Cohen said: "There is no doubt that cost is a significant factor in any outsourcing arrangement. However, organizations need to take a longer-term view of what an outsourcing relationship can accomplish for their operations overall."
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My 2-cebt worth comment re outsourcing that creates jobs for foreigner-workers or firms BUT denying jobs that have been held for years with royalty spirit of employees being retrenched in the name of fair settlement but employees have given their best years of their lives reaching to retire properly settle with their promised "nest-eggs" lose out owing to being too old to meet "unaccustomed work requirements" from such pre-matured retired employees resulting in losing useful citizens, whose promised lots were given outsourced workers i.e. foreigners.
Posted by Lee Thian Leong on Monday, November 26 2007 04:38 PM