Discover the Hidden Costs of Outsourcing
Avoid surprises. Uncover, measure, and mitigate hidden costs of outsourcing.
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Last Revised: August 16, 2011
- Business and IT leaders have come under increasing pressure to cut costs, in part due to hype surrounding the cost-cutting potential of outsourcing.
- Outsourcing projects frequently go over budget and fail to deliver the promised cost savings.
- IT leaders hesitate to use outsourcing when the final project costs are highly unpredictable.
- Info-Tech identifies seven hidden costs of outsourcing that, on average, add 25% to the overall cost of an engagement.
- IT leaders underestimate the magnitude of each of these costs at least 20% of the time. Effective management of outsourcing requires the IT leader to correctly budget for and take steps to reduce these hidden costs.
- Each of the costs manifests in a different way for application and infrastructure outsourcing, but apps and infra engagements mostly experience the costs with the same frequency and magnitude.
- While large, brand name outsourcing vendors offer a host of client management services, these services do not reduce the likelihood that hidden costs will creep up on clients.
Impact and Result
- Find the risk of each hidden cost for your outsourcing project pertinent to your outsourcing engagement characteristics and your organization characteristics.
- Manage your outsourcing engagement to reduce hidden costs and increase your net benefit.
- Decrease hidden costs both for contracts that are already signed, as well as contracts that are up for review or renewal.
- Calculate the net outsourcing cost you can expect with each available vendor.
- Acosta Sales & Marketing
- FTP Inc.
- GTS Central Europe
- Health Intelligence
- Jay Lambert Consulting
- Sage Automation
- The Royal Conservatory School
- Thundermist Health Center
- An additional six companies contributed to this research. Due to the sensitivity of the information, their identities will be kept confidential.
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Best Practices Toolkit
Avoid and mitigate the hidden costs of outsourcing
Improve the budget performance of your outsourcing engagement.
Predict the likely hidden costs of outsourcing for each vendor under consideration
Make an informed choice whether to outsource and choose the best vendor, based on the total cost picture.
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