Companies that see outsourcing as an opportunity to offload problems are in for a rude awakening. A big reason outsourcing arrangements fail before they even get off the ground is unrealistic expectations, says Blake Hanna, a partner at Accenture,
a Toronto-based outsourcing company.
“”Straighten out your mess before you outsource it,”” advises Hanna. “”If you don’t know the level of performance you’re at now, how will you know how to measure it?””
More than one-quarter of outsourcing deals fail in the first year, according to a recent white paper from Toronto-based IT consultancy Compass. Furthermore, half of all companies engaged in outsourcing arrangements seek to renegotiate their contracts, often with other service providers.
Quick fixes are not what companies should be seeking from an outsourcing deal, says Jason Bremner, program manager of outsourcing services at IDC Canada in Toronto.
“”You just transfer a problem to someone else and hope it gets fixed,”” he says.
Hanna admits outsourcing can help companies solve specific challenges, but only if they have a clear map of their objectives up front. Organizations that are successful with outsourcing, he says, are those that “”turn to outsourcing as a catalyst for change.””
According to a study released Friday on outsourcing from IDC Canada and Accenture — called Outsourcing: Shared Risks and Shared Rewards — the reasons companies outsource some business processes are not the same today as they were yesterday. Not so long ago, companies saw outsourcing as a way of reducing their costs. Today, however, the study reveals cost has slipped to number three on the list of reasons companies outsource, behind an improved focus on core business (number two) and access to skilled resources, which ranks as the most important benefit derived from outsourcing.
In Canada, IT outsourcing is a $5 billion business, according to IDC estimates. The activities companies are considering outsourcing, according to the survey of 177 executives across the country, include IT infrastructure (34 per cent); application development and support (26 per cent); and call centre ( 18 per cent). Only two per cent of executives surveyed indicated they were considering outsourcing IT security.
A sharper business focus was the strategy behind a 10-year $4-billion deal DuPont inked with Accenture in January 2002 to implement and manage an enterprise resource planning system from SAP. In recent years, the global chemical company has transferred 3,000 IT workers to its two main technology service providers, Accenture and CSC. The IT staff that remain at DuPont — about 1,200 around the world, including about 24 in Canada — are respo