Management Toolkit

Bleak outlook for IT outsourcing

Kablenet.com

Published: 07 Jun 2006 10:10 BST

Most government organisations' IT outsourcing (ITO) projects are "doomed before they begin", according to new research

Government organisations and suppliers are not aligned when it comes to interpreting and agreeing IT outsourcing objectives, says PA Consulting Group's 2005/06 Understanding Misunderstanding survey, released on 6 June 2006.

It says that lack of planning and poor business cases leads to future problems, and that insufficient attention is given to planning and due diligence.

ITO does not get the "respect it deserves. It is genuine misunderstanding which puts parties at loggerheads from the outset," says the survey.

Richard Harrison, a member of PA Consulting management board, told GC News: "Although government bodies are getting better they are not able to express their requirements leading to suppliers misunderstanding, despite 30 years' practice."

All government respondents surveyed said their ultimate goal in using ITO to deliver business transformation was service improvement rather than cost reduction. But when suppliers were asked what their clients wanted most, 100 percent said government bodies were after cost reduction.

"This suggests a breakdown in the negotiation process and ongoing management," the report says. "This is backed by the fact that 71 percent said with hindsight they would increase the importance of service innovation when selecting their supplier."

Seventy-nine percent of clients, private and public, put greater importance on access to skills compared to 14 percent of suppliers. Only 21 percent of suppliers and 38 percent of lawyers thought their clients articulated their objectives clearly to the supplier marketplace.

Fons Kuijpers, PA head of IT sourcing, said: "There is no excuse for IT outsouring deals to go wrong in a mature market. Yet even now, many IT outsourcing deals are doomed before they start because of poor business cases where key items such as costs for the retained organisation have been omitted.

"Equally worrying, suppliers and clients have different expectations of the desired outcome. This is largely due to the clients inability to articulate clearly what they seek to achieve from the deal, and partly due to suppliers pursuing their own agenda."

PA surveyed over 300 international IT chiefs in Europe, Asia-Pacific and North America, along with major global IT outsourcing suppliers and legal advisors. The majority of government bodies surveyed were in the UK.