A survey of 200 European executives by analyst house Gartner found that 55 percent of those businesses with outsourcing contracts have renegotiated the deal.
One in eight contracts had even been renegotiated within the first 12 months of their operation, Gartner found, while only 23 percent of companies said they did not expect to renegotiate their contracts.
But only six percent were planning renegotiations to rescue existing deals, which Gartner said confirmed its view that relatively few companies are actively looking to bring outsourcing back in-house.
Half of survey respondents highlighted lack of flexibility as the biggest issue leading to renegotiations. Cost reduction was another key area, with two in five saying they paid too much for their outsourcing.
Gartner senior analyst Gianluca Tramacere said many companies had set up long-term outsourcing deals based on short-term cost cutting needs. "Organisations don't realise that their needs are going to change," he told silicon.com.
He said the "sense of disillusionment" that came from this is one of the biggest inhibitors to outsourcing.
But the analyst house said that some renegotiation, in the form of a mid-term review, is a good idea.
And as internal IT departments start to act more like a manager of different services rather than simply a provider, more emphasis should be put on correctly acquiring the right mix of internal skills.
Companies should spend at least four per cent of their IT budget on putting in place the right team to manage the deal, and should regularly review their sourcing strategy and exit management plans, Gartner said.
Tramacere said: "Outsourcing is not just about getting rid of people, it's about acquiring people -- if you don't have the [right] skillset you will continue to have tough discussions about a lack of clarity."
4%
2%
Sounds like old news !
Unfortunately in Australia the focus is almost always on cost savings.
Most organisations who outsource don't understand their technology business or individual business unit requirements.
They end up outsourcing the problem, then all the good people (and skills) leave the company along with all the IP and goodwill to keep systems running (...you know, the people who will respond to break-fix issues at 2am).
Outsourcing might "fix" the baseline costs.... but keep in mind outsourcers make profit from projects... which are generally marked up labour events to the tune of 30-70%.
How many GREAT outsourcing arrangements do you hear / know of in Australia right now?
James.