Outsourcing: Growing strong despite some weaknesses
Outsourcing is growing strong and organizations involved in this practice either want to maintain their sourcing level or want to increase it, according to a KPMG’s recent study, Strategic Evolution, based on responses from more than 650 organizations (both customers and services providers) from 32 countries.
Eighty-nine percent of respondents to the study say they plan to maintain or increase their present level of sourcing. “This industry is going to go much beyond where it is today” says Pradeep Udhas, Global Head, KPMG Advisory Services.
On contributions of service providers, customer respondents believe that service providers generally make positive contributions to the success of their organizations. Forty-seven percent of customers consider that their service providers brought experience to their business that they previously did not have.
Reflecting on the statement “as many as half of sourcing deals fail,” 62% believe that the statement is a gross or mostly an over simplification; 25% believe the statement is “not an oversimplification but nor entirely appropriate” and only 13% believe that it is an appropriate view.
But, interestingly, 72% of surveyed customers said that either they do not have a defined list of measurement criteria for evaluating success or they do not share them with their service providers.
On common problems in sourcing, interestingly, both customers and service providers said most problems are related to people. About 60% of respondents (customers and service providers) believe almost or mostly always problems are people related. Only 30% believe about half the problems are people related and half technology related; about 10% believe almost always or mostly problems are technology related.
While the survey reveals some positive aspects, it also exposes two significant weaknesses:
- Lack of appropriate criteria or measures for assessing success of an outsourcing project
- Problems in IT outsourcing mostly people related, not technology related
I believe both customers and service providers need to address these two weaknesses to make outsourcing/offshoring IT projects even more successful. So,
1. What are the criteria for assessing success of an outsourced/offshored IT project, from customers’ as well as vendors’ perspectives? In other words, what are the measures of success?
2. Which people-related problems are most common, and how those problems could be addressed?
Before we discuss these issues further in later blogs, let us gather your views: Do you generally agree with the survey findings? How would you address these issues?
Professor San Murugesan, Australia
Comments
These problems are only temporary. Advancing technology is changing outsourcing methods, as this article says.
Posted by: Susan Pusina | April 15, 2008 03:00 AM