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Story URL: http://www.silicon.com/research/specialreports/enterprise/0,3800003425,39124067,00.htm

Firms risking IT outsourcing failure
Not enough pre-contract due diligence going on, says research

By Andy McCue

Published: Friday 17 September 2004

Businesses are running the risk of entering into duff IT outsourcing contracts by failing to conduct a rigorous enough evaluation of the business case and potential suppliers, according to new research.

The Benchmark Research study, sponsored by outsourcing consultancy Orbys, questioned senior execs at 100 UK and global firms with revenues of more than £100m.

It found that 28 per cent did not fully evaluate the business case before signing an outsourcing contract and more than a third (34 per cent) failed to undertake a complete risk analysis.

Orbys CEO David Keighley said many firms are doing the due diligence too late or not at all.

"If you don't put the details in early at the request for proposal (RFP) stage you are unlikely to get a robust contract out of it," he said.

Despite those statistics, the research found that outsourcing is still high on the IT agenda for businesses and that many are seeing real benefits and cost savings.

Almost a third (29 per cent) said their outsourcing contract exceeded expectations and 61 per cent said it was in line with expectations. Only nine per cent were unhappy with the outcome. Just over a third (36 per cent) also said they were happy with the cost savings.

A distinct trend also appears to have developed between contracts signed before and after 2000. Those signed before 2000 have a higher satisfaction rate than newer contracts -- something that Orbys puts down to businesses giving the contracts time to "bed in".