Outsourcing: The future's bright, but also hot?

Two new snippets of information have emerged this week which - like chemicals in a lab - might look innocuous enough apart, but prove explosive when combined.

First, the FT estimated yesterday in a study of contracts listed in the Official Journal of the European Union that public sector outsourcing tenders worth some £4 billion are currently under negotiation. This by no means relates just to ICT outsourcing - that is estimated at about 5%-6% of this figure, with far higher levels associated with business process outsourcing - but ICT does form a significant part and plays a role in other contracts as well.

The second piece of information is a survey of 250 IT professionals released today by security software specialist Lieberman Software, which reveals that IT outsourcing, instead of saving organisations money, can actually end up costing significantly more.

According to the survey, 42% of respondents reported that costs for their outsourcing agreements were higher than originally planned. Even more alarming, almost two-thirds of respondents - some 64% - believe that their IT outsourcer had actually invented projects to inflate their fee.

Although most organisations - 71% - do outsource a 'significant portion' of their IT requirements, only 15% said they trusted the quality of work performed by their outsourcers more than work performed in house; 52% felt the quality of service was about the same; while 33% have less trust in the work performed by the outsourcer.

The FT reports the first snippet as a "boom" for outsourcing, but combined with the second, the boom could be louder and more damaging than people expect. With no money to spare in the public sector, we cannot afford any false friends.

The software company's CEO Philip Lieberman said that while outsourcing might at first appear to be the perfect solution to cutting costs in times of austerity, "the reality is that the grass is not always greener and for some it's actually a mirage. The fact that trust in the quality of work is being eroded is a worrying trend but, for me, the thought that work is being manufactured to inflate fees is even more of a concern.

"IT, when used effectively, is increasingly a strategic tool for successful companies. In the coming decades, the winners will be those organisations that use technology to create differentiation that's difficult for competitors to match. For this reason, the decision to outsource should not be taken lightly.

However, for those organisations that are going to do so, they must select their IT outsourced partner on an appropriate set of criteria - not just cost, but resiliency, transparency, data security and ultimately trust."

Then light the blue touchpaper and stand back.

Lieberman Software outsourcing survey www.liebsoft.com/2012_outsourcing_survey