Outsourcing saves less than claimed

Thu Apr 13, 4:32 AM ET

Outsourcing of information technology and business services delivers average cost savings of 15 percent, a survey found on Thursday, disproving market claims that outsourcing can reduce costs by over 60 percent.

After professional fees, severance pay and governance costs, savings range between 10 percent and 39 percent, with the average level at 15 percent when contracts are first let, according to outsourcing advisory firm TPI.

"This research proves that the promise of massive operational savings is unrealistic when you take into account the costs of procurement and ongoing contract management," Duncan Aitchison, TPI's managing director, said in a statement.

"In our experience, outsourcing arrangements which focus solely on delivering huge savings often fail to meet client expectations," he added.