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IT Pros: IT Outsourcing More Costly Than Expected

Managed services and outsourcing partners may have work to do in improving their reputations if a new survey out this week is any indication. According to a survey conducted by Lieberman Software among 500 IT professionals, more than three-quarters of IT professionals who work in organizations that use outsourcing say their providers have "made up" […]

Written By: Ericka Chickowski

May 14, 2011

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Managed services and outsourcing partners may have work to
do in improving their reputations if a new survey out this week is any
indication. According to a survey conducted by Lieberman Software among 500 IT
professionals, more than three-quarters of IT professionals who work in
organizations that use outsourcing say their providers have "made up"
work in order to rake in extra cash.

The survey found that 43 percent of IT professionals work at
organizations that have outsourced a significant portion of their IT, with
larger organizations even more likely to outsource for efficiency reasons. But
as the outsourcing trend has progressed, many organizations are becoming
disillusioned with their services, says Phil Lieberman, president and CEO of
Lieberman Software.

“Once upon a time, IT was seen as the lever arm of the
company – a group that could use technology to make the organization more
competitive, exciting and different in the marketplace. Industry analysts and
consultants in the area of business process management came up with the idea
that every job could be fully described and therefore outsourced to the lowest
bidder," he says. “Given that the advice came from a ‘credible source’
these executives were able to achieve remarkable reductions in cost and liability
for a while, until business challenges began to appear that required
flexibility, corporate knowledge, and dedication to the company. The
experts never considered dedication and loyalty as elements in their ‘process
reengineering’ – it was deemed as not quantifiable.”

What’s more, the savings many organizations hoped to achieve
through outsourcing are not nearly as substantial as they initially projected.
Approximately 62 percent of survey respondents
reported that they paid more than they anticipated on their outsourcing
agreements, with 27 percent reporting that they had spent "significantly
more" than they planned. Only 11 percent reported that they paid less than
they expected.

These figures also went up drastically for organizations
with over 1,000 employees. Approximately 82 percent of professionals a these
organizations reported that their outsourcing deals cost them more than
expected.

“What I see today, and what this survey confirms, is that
many organizations are growing frustrated with IT departments that consist
largely of outsourced employees who come and go at the whim of outsiders,"
says Lieberman. "If organizations are going to outsource IT they must
measure their outsourcers’ performance across the appropriate set of criteria –
not only cost, but resiliency, transparency and data security.”

IT Pros: IT Outsourcing More Costly Than Expected

Ericka Chickowski

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