Tuesday, August 07, 2007

Low cost savings may trigger reverse outsourcing


Below expected cost savings achieved by outsourcing of IT services are forcing a number of corporates in western countries to think over bringing part of their jobs back in-house, according to a new study.

The report released today by International technology research agency Forrester said organisations in North America and Europe plan to continue their outsourcing initiatives despite cost-savings concerns, but at the same time, many of them also plan to bring some elements of outsourcing portfolio back in-house.

As per the report, 36 per cent of the firms surveyed agreed that cost savings from services were lower than expected and another 28 per cent of respondents believed that their providers are unable to respond rapidly to changing business needs.

"Although relatively few outsourcing clients say the quality of work that IT services and outsourcing partners perform is poor, they nevertheless have concerns about their providers and the cost effectiveness of outsourcing," Forrester Principal Analyst Bill Martorelli said in the report.

In addition, many respondents indicate that they intend to bring some services, or some element of services, back in-house after outsourcing them, the report said.

"This also suggests they no longer view outsourcing as a one time activity but as part of a continuum with significant fluidity in between phases," Martorelli said.

However, the clients have substantial plans to outsource various IT activities, suggesting that expectations for growth in the industry are well founded, he added.