Outsourcing goals too short sighted, say analysts

Cutting costs remains the primary reason for most organisations outsourcing IT infrastructure, but savings are often unsustainable or unrealistic, says Gartner analyst, Linda Cohen.

Cutting costs remains the primary reason for most organisations outsourcing IT infrastructure, but savings are often unsustainable or unrealistic, says Gartner analyst, Linda Cohen.

Placing too much emphasis on cost reduction can lead to dissatisfaction because the savings are either unsustainable or never achieved, said 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.

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"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 specialised skills and resources, to enable the internal IT organisation 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, organisations need to take a longer-term view of what an outsourcing relationship can accomplish for their operations overall."

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