[lit-ideas] Outsourcing
- From: JimKandJulieB@xxxxxxx
- To: lit-ideas@xxxxxxxxxxxxx
- Date: Thu, 13 Apr 2006 14:53:52 EDT
_http://news.yahoo.com/s/nm/20060413/tc_nm/outsourcing_dc;_ylt=AlXVYgXJxypEgpN
hi.pyjjMDW7oF;_ylu=X3oDMTBhZDhxNDFzBHNlYwNtZW5ld3M_
(http://news.yahoo.com/s/nm/20060413/tc_nm/outsourcing_dc;_ylt=AlXVYgXJxypEgpNhi.pyjjMDW7oF;_ylu=X3oDMTB
hZDhxNDFzBHNlYwNtZW5ld3M) -
AMSTERDAM (Reuters) - Outsourcing of information technology and business
services delivers average cost savings of 15 percent, a survey found on
Thursday, disproving market claims that outsourcing can reduce costs by over 60
percent.
After professional fees, severance pay and governance costs, savings range
between 10 percent and 39 percent, with the average level at 15 percent when
contracts are first let, according to outsourcing advisory firm TPI.
"This research proves that the promise of massive operational savings is
unrealistic when you take into account the costs of procurement and ongoing
contract management," Duncan Aitchison, TPI's managing director, said in a
statement.
"In our experience, outsourcing arrangements which focus solely on delivering
huge savings often fail to meet client expectations," he added.
Cost reduction remains the primary motivation behind current outsourcing
contracts, but an increasing number of companies are outsourcing primarily to
improve quality, at 21 percent now versus 11 percent in 2004.
The first three months of 2006 had the largest number of outsourcing
contracts ever signed in the first quarter of a year. TPI found that 83
contracts
were signed, valued globally at over 18 billion euros ($21.9 billion),
compared
with 76 deals worth just over 13 billion euros over the same period last
year.
IBM, EDS and T-Systems were the main beneficiaries of contracts let in the
first quarter of 2006, winning total contract values of 3.7 billion euros, 3.6
billion euros and 1.1 billion euros, respectively.
The pipeline of deals on which TPI is currently advising is led by EDS, IBM
and CSC, which are competing for deals totaling 6.4 billion euros, 6 billion
and 4 billion, respectively, it added.
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