IT outsourcing is a constant source of debate. Ovum recently suggested, adding to it that the Government should outsource IT to India. The initial appeal of offshoring to India is undeniable – the low costs of land and labour would greatly benefit a Government that is battling to cut costs, with reduced budgets and reduced staff numbers increasing the pressure.
However, while the initial reduction in costs may seem like an opportunity too good to pass up, this is not a decision the Government should take lightly. IT outsourcing contracts need to be thoroughly scrutinised, especially as many contain hidden costs that may eventually cancel out any initial savings.
Research carried out by Vanson Bourne found that 3 out of 5 UK businesses failed to consider the ‘hidden’ costs of offshore outsourcing. The result is that 75% of those organisations have been disappointed by the quality of offshore outsourcing. In the current climate, the Government simply cannot afford to make anymore financial mistakes. It is therefore crucial that any outsourcing decisions are considered carefully and that long-term, as well as short-term, factors are taken into account.
The Hidden Costs
For many organisations, whether in the public or private sector, making immediate cost savings remains the number one concern when looking to outsource. However, focusing only on a daily cost approach is dangerous, particularly if choosing to outsource IT projects abroad, as businesses will often look to outsource to the regions with the lowest costs, ignoring things like quality and business innovation.
The hidden costs associated with travelling to the sites, management time spent out of office while visiting far-off regions all have an effect on overall cost-savings. The same of course can be said for potential complications that are impossible to predict, such as airport strikes and the recent ash cloud fiasco. All of these issues cost money and mean the Government would end up spending far more time and money than it intends to.