83% of all respondents reported their projects met their ROI goals of slightly above 25%. A majority (70%) were satisfied or very satisfied with their outsourcing arrangements. However, 39% reported they had terminated at least one outsourcing contract and transferred it to a different vendor. Of those who were dissatisfied or very dissatisfied with their largest contract, 50% had brought the function back in house, and 61% reported they had escalated problems to senior management in the contract’s first year. While most executives reported outsourcing was working financially, their relationships were not without problems.
Of the 70% majority, only 34% of the executives felt they gained important benefits from innovative ideas or transformation of their operations. Thirty-five percent of executives, including 55% of executives who were not very satisfied, wished their companies had spent more time on vendor evaluation and selection. If they could start over again, 49% of the executives surveyed said they would define service goals that aligned better with their companies’ business goals. The dissatisfied respondents saw underestimated scope, higher-than-expected costs and poor quality communications, service and reporting from their service providers.
The survey also included 31 service provider executives, who by a 3-to-1 margin felt their client companies were not prepared for outsourcing, didn’t have a solid plan, didn’t have the operational data to make sound outsourcing decisions and/or didn’t understand how the to-be organization would really work.
The report emphasizes that executives should consider cost reduction as a “given,” rather than a primary driver in outsourcing, and look at innovation and transformation as real benefits. But attempting to fix a dysfunctional operation through poor planning and lack of due diligence will result in failure. As the report says, “outsourcing initiatives succeed by design, not luck.”
