I noticed this post on a ZDNet site.  The discussion summarizes a recent Gartner report on outsourcing.  As I certainly don’t have the resources to secure direct access to a Gartner report, I’ll have to rely on Andy McCue’s assessment of the document.  According to Mr. McCue, the primary message seems to be:

“Cutting costs remains the primary reason for most organisations going down the outsourcing route, despite unsustainable or unrealistic targets for savings.

But companies lured into outsourcing by promises of cost savings are letting themselves in for long-term problems that outweigh any short-term gains, according to Gartner analysts.

Linda Cohen, vice president and distinguished analyst at Gartner, said placing too much emphasis on cost reduction can lead to dissatisfaction because the savings are either unsustainable or never achieved.”

Ms. Cohen is also credited with saying,

“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.”

Gartner’s assessment mirrors my own concerns.  By continuing to operate with a fundamentally broken model for outsourcing, we are reinforcing a situation where the client’s expectations are not consistent with what they are actually buying.  If the clients are using cost reduction as the primary evaluation criteria, they are looking at the wrong metric.  They need to be evaluating their outsourcing relationships solely on the basis of the level of efficiency in terms of benefiting the organization.  I hate to bring up ROI, but a rigorous exploration and evaluation of the impact of outsourcing both in terms of real cost and real benefit to the organization is required.  It’s no surprise that we’re still wondering whether offshore outsourcing is failing.  One small step would be for us to start agreeing on work product, or results, based engagement models.

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