Outsourcing is out of touch with reality

• By Michael Alexander
• June 7, 2005

I’ve never been a big fan of outsourcing because I think the strategy favors short-term gains over the value of smart people and because the supposed cost savings just don’t add up. After reading DiamondCluster International’s latest study on outsourcing, I’m feeling pretty satisfied with myself for being so smart.

DiamondCluster talked to 210 senior IT executives at global 1000 companies and 242 senior executives at outsourcing service providers in the U.S., India and other countries. What the consulting firm found was that a growing number of companies who bought outsourcing services are dissatisfied with their offshore service providers and are prematurely terminating contracts.

DiamondCluster's third-annual study was the first in which any buyers reported they are planning to reduce their outsourcing spending. Seven percent will decrease onshore outsourcing and five percent will do the same with offshore outsourcing.

"Many buyers are now several years into at least one outsourcing relationship, but they still lack effective measures to gauge the success of their outsourcing initiatives, which are critical for knowing and getting what you want," says Tom Weakland, who leads the outsourcing advisory services practice at DiamondCluster.

Outsourcing just doesn’t pay. The big-dollar savings aren’t there, for one thing, but more important than that, is companies that outsource have lost good people and the knowledge and experience they carry with them. I guess you really can’t put a price tag on talent until you no longer have it.

How about you? What has been your experience with outsourcing? Has your job been teleported overseas? Do you think the strategy has paid off for your company? If enough people are willing to talk about outsourcing’s promises (those that have materialized and those that have failed), we’ll put their experiences into a feature in ADT.

If you want a copy of the study, e-mail: [email protected]