Most firms will outsource before 2006

Nearly all companies will outsource core business responsibilities within the next three years, industry experts predicted yesterday.

According to Outsourcing Desk Reference, a new report from analyst Meta Group, some 70 per cent of companies are currently outsourcing, while nearly all firms will embrace the model by 2006.

But the analyst firm advised that outsourcing is a long-term decision that should be made very carefully.

"The first step should be to articulate primary business objectives before outsourcing vendors are invited for briefings. Don't make vendor selection or negotiation your first step," warned Dean Davison, vice president and director of Outsourcing and Service Provider Strategies at Meta Group.

"Most importantly, expectations need to be realistic and set ahead of time. Incorrect expectations are the primary reason why outsourcing arrangements are perceived as failures."

The report also warned firms not to fall for some of the "most common misconceptions about what an outsourcing arrangement can achieve", including the expectation that IT expenses will automatically be reduced, and that offshore vendors can offer huge savings.

"While such results might occur, there are no guarantees," Davison added.

"With the help of benchmarking tools, organisations need to weigh the risks associated with outsourcing against the risks of keeping the skills in-house."

John Luc Alarcon, senior vice president and director of Data Services and Published Research at Meta, added: "Organisations are starting to realise that improving value from outsourcing and vendor relationship management can generate substantial business benefits."