Outsourcing Contracts Up, But Savings Questioned
Source: By Paul McDougall, InformationWeek, Apr 13, 2006 08:00 AM
More companies are outsourcing than ever before, but they may be saving a lot less from the process than anticipated, according to a newly released market survey. In its quarterly review of the IT and business process outsourcing market, advisory firm Technology Partners International found that the total value of all contracts worth more than $50 million signed in the first quarter of 2006 increased 173% year-over-year to $22.7 billion. ......
........ But while more firms are turning critical IT and business functions like help desk support and customer service over to third parties, who in turn often send the work to subsidiaries in low-cost countries like India or China, they are saving less from the process than is widely believed. In India, programmers and service workers are paid anywhere from 80% to 40% less than their U.S. counterparts. However, the overhead associated with outsourcing appears to be eating up the bulk of those savings. Factoring in transition, legal, advisory and management costs, outsourcing typically lets a company reduce the expense of a particular function by 15%, TPI says.