Have CTOs failed to measure the financial impact of their outsourcing?

admin wrote this on 23 Apr 2013

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Outsourcing is the contracting out of an internal business process to a third-party organization. The practice of contracting a business process out to a third party rather than staffing it internally is common in IT industry.

But the irony is most of the CTOs have failed to measure the financial impact of their outsourcing, according to research done by leading B-Schools.

For example, British businesses spent 12 percent more on outsourcing in 2008 than the previous year. It attributed the increase to attempts to cut costs in the recession. Over half of those surveyed had high expectations from outsourcing, expecting to see a return on investment in only a year. Expecting outsourcing as a magic wand.

Of the businesses that tried to quantify the benefits of outsourcing, just one in five said they were confident of their sums. Nearly all businesses were unsure of the exact amount they spent on outsourcing.

A fifth of firms were also unsure if they had even tried to measure the effects of outsourcing. But CIOs got the blame, with 63 percent of chief financial officers saying their CIO was unable to quantify the benefit of outsourcing to the business.

Many other firms even questioned the point of measuring the effects of outsourcing in the long run. Nearly four in 10 said the business value of outsourcing could not be assessed beyond a one-time cost saving.

The main objective of outsourcing should not only be cost saving. It should give you an option to concentrate more on core business of a company. Outsourcing decision is generally a strategic decision and one should enter a strategic alliance after giving proper thought.

Neev Technologies is a leading outsource software Development Company from Bangalore India. To know more about capability areas write to [email protected] .