Expectations on outsourcing not met

More than fifty percent of all German companies are dissatisfied with their outsourcing projects. 55.2 percent of them deplore that the objectives to be met by outsourcing have hitherto not or only in part be achieved with the main objective of two thirds of executives questioned being the reduction of costs. These are the findings of the recent “Successful outsourcing strategies” benchmarking study by Steria Mummert Consulting in co-operation with InformationWeek.

In particular financial service providers are dissatisfied with the implementation of their outsourcing projects: One out of five companies think that none of the objectives aimed at has been reached. Half of them hold the opinion that only fifty percent of all projects planned were implemented. Similar experiences were made by public administrative bodies and companies in the processing industry the expectations of which were not met at all or only in part in more than 60 percent of all cases. More successful results are presented by the trade sector where almost two thirds of those questioned consider their outsourced work processes to be a success.

Among other things, the dissatisfaction of those experts and executives surveyed is a consequence of their exaggerated level of expectation which in many cases is due to a lack of experience with outsourcing. This in particular applies for small and medium-sized entities (SMEs). Whereas only 21.4 percent of companies with an annual turnover of less than one million Euros have experiences in the outsourcing practice, almost sixty percent of groups with a turnover of more than one billion Euros can count on their own outsourcing know-how.

Those companies with outsourcing experiences are able to reach average cost reductions of 19.5 percent. Particularly successful in this respect are companies from the IT sector the outsourcing activities of which resulted in more than 60 percent of all cases in cost reductions of between ten and thirty percent. Reductions of this order, however, were only obtained by about 35 percent of financial service providers.

Apart from cost savings there are other important aspects to outsourcing. 54.4 percent of company leaders expect a better service, about fifty percent want to make their companies more flexible by reducing fixed costs. More than one quarter of decision makers wish to pass the risk of a production breakdown on to external companies and optimize their processes.

In the course of the study Steria Mummert Consulting in co-operation with InformationWeek questioned 754 experts and executives via internet in May 2006. GERMAN