Outsourcing fails to deliver for third of UK firms

Outsourcing has failed to deliver the expected benefits for a third of UK businesses with many bringing services back in-house, according at a new wide-ranging survey.

The Gallup survey commissioned by Proudfoot Consulting questioned 925 companies worldwide. Out of the 150 UK businesses 29 per cent said they currently outsource their IT support and 44 per cent said they don't outsource any business function.

While the majority (57 per cent) were happy that outsourcing had delivered 100 per cent of the benefits expected, a significant minority (31 per cent) said it had delivered less than half of the predicted benefits. Seven per cent declared their outsourcing a complete failure.

But the survey highlighted the problem many firms face when outsourcing goes wrong.

The survey asked the respondents if they had ever brought services back in-house after a bad experience of outsourcing. Out of the 150 UK firms 85 per cent said no, with just 15 per cent actually going as far as bringing an outsourced function back in-house.

Two-thirds of the companies questioned were small to medium-sized businesses with the rest being large companies with over 1,000 employees.

Phil Morris, director at outsourcing advisors Morgan Chambers, said when outsourcing deals fail it is usually because they were badly handled from the start.

"Most outsourcing failures begin as a stuttering relationship [with the supplier] and then become failures," he said.

He said the complexity of bringing it all back in-house when it goes wrong and transferring staff again means that most companies opt to simply try a different supplier instead.

"There are a substantially greater number of companies that solve failing outsourcing by going to a different outsourcer and opting for a different sourcing and delivery model. We see more re-letting than un-outsourcing," he said.

Morris added, however, that companies going down this route then often have a "second honeymoon" with the new supplier because of the lessons they have learnt first time round.