View Full Version : Are Outsourcing Cost Savings Estimates Misleading?
01-26-2004, 06:16 AM
While wporking for a IBM laboratory, the decicion was made to potsource a major project to India (the Tata corp.). Initially, the plan was to have 2 IBM staffers keeping track ogf the project, the rest (architecture, design, coding, and tests) done by TATA. The Tata corp. didn't have the same view of quality assurance, and in the end we ended up with 5 fulltime IBM staffers locally, and the project was delayed by 6 month +. When doing the financials, it turned up that more than likely, keeping the project in house would have been on the order of 15% -25% cheaper. Anyway, maybe we were unlucky, or this was an exception. However, even your estimate of 20% cost saving may be optimistic, the IBM laboratory I was working for never outsourced a major project again. I can't help but think that maybe the true cost of outsourcing projects that you have analyzed have either been small or that accounting of the projects have been flawed. B
02-02-2004, 05:27 AM
B, The statistics that were quoted in the article were from The META Group, a third party IT analyst organization. The important part of their report was to warn CIOs that -- in their haste to reduce costs -- there are hidden expenses that are not readily accounted in many estimates. MC Press has no relationship with META Group. However, the positive hype that has been spinning the outsourcing issue for CFOs does need to be recalibrated. The conventional CFO wisdom says that outsourcing saves money over the long haul. IBM itself does a tremendous amount of outsourcing -- though perhaps the project you identified was not a success. Thanks for your comment, Thomas M. Stockwell Editor in Chief
02-02-2004, 06:12 AM
This is a discussion about Are Outsourcing Cost Savings Estimates Misleading?
02-02-2004, 06:12 AM
Thomas Stockwell wrote: However, the positive hype that has been spinning the outsourcing issue for CFOs does need to be recalibrated. You have said it all in a single sentence. One could not echo these sentiments loud enough, strong enough, or enough times to ensure that the message is properly heard. Dave
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