Flying Blind with Outsourcing?

[OhioChick]

August 12

Despite spending billions of dollars in investments each year, many large European firms simply aren’t measuring financial returns from outsourcing, according to a study released on Aug. 12.

The report, prepared by Cognizant in conjunction with Warwick Business School in the U.K., surveyed more than 250 Chief Information Officers and Chief Financial Officers across five regions in Europe (the U.K., Germany, Switzerland, France, the Nordic countries, and Benelux). It found that only 8% of respondents were confident they knew what their company spends on outsourcing in terms of time and money, and fewer than half (43%) bother to measure the financial impact of the outsourcing contracts they commission.

Dr. IIan Oshri, a fellow at Warwick Business School, professor at the Rotterdam School of Management in the Netherlands, and co-author of the study, says the lack of measurement leaves companies ill-equipped to plan future investments.

“Not understanding both the short term and long term impacts of outsourcing is a distinct disadvantage,” says Oshri. Meanwhile, firms that understand their outsourcing arrangements can spot problems as well as opportunities “to move beyond service continuity toward innovation.”

The research was conducted from April to July of this year and is based on conversations with over 250 European CIOs and CFOs from companies with revenues of over $500 million. IT application maintenance is the most common outsourcing service used by companies surveyed (76%), followed by IT development projects (53%) and IT and technology consultancy (50%).

Other findings include:

• More than a third of respondents (37%) don’t try at all to quantify the financial impact of outsourcing arrangements and one fifth (20%) cannot remember whether they have tried.

• Of the CIOs and CFOs who have tried to calculate the impact of outsourcing to their business (43%), only 19% are very confident in their calculations.

• Only 37% of CFO respondents say they are confident in their CIO’s ability communicate the impacts of outsourcing to others at the company.

• Still, 61% of respondents say they plan to either maintain or increase their outsourcing investments in the coming months.

A Web site summarizing the report’s findings will be live starting at 21:00 London time on Aug. 12. The full report is scheduled to be released in September.

http://www.businessweek.com/globalbiz/blog/europeinsight/archives/2009/08/flying_blind_wi.html

I'll bet the suits at US corps are just as fucking clueless.