Companies Move Away From Single-Supplier Sourcing
Organisations are increasingly looking to spread their options when it comes to choosing an outsourcing supplier, according to the latest survey of the market from PMP Research.
Aug 13, 2006
Organisations are increasingly looking to spread their options when it comes to choosing an outsourcing supplier, according to the latest survey of the market from PMP Research. Many are signing shorter contracts and are prepared to consider switching suppliers or even contemplate taking their facilities back inhouse to get what they want. The research has been commissioned by the Evaluation Centre.
Two-thirds of those polled (68%) say they prefer selecting multiple suppliers to opting for a single outsourcer (19%).This trend is set to continue, with three-quarters (77%) indicating they will be going down the multi-sourcing route in the future, compared to 16% who want to stick with one supplier.
Around half (47%) also report trying to transfer from one outsourcing supplier to another at some point, or attempting to re-activate their services internally, although such moves are often characterised as either ‘difficult’ (53%) or ‘very difficult’ (5%).
However, these decisions are not the result of growing dissatisfaction with outsourcers’ performance. Half of the sample reckon their current service level agreements (SLAs) are either met exactly as anticipated (26%) or even exceeded (36%).
Moreover, 10% say there has never been an instance where a supplier has failed to provide a service as specified once the contract begins. A third (33%) maintain such a problem is very rare and 38% state that while this has occasionally happened, it has been possible to find a solution fairly easily. Only a minority (13%) claim this has occurred frequently.
Instead, organisations are concerned about retaining flexibility over their outsourcing deals. Not a single company, for instance, admits to signing a contract intended to last more than 10 years and in most cases time horizons are shrinking.
The majority now expect a contract to cover a period of one to two years (39%) or two to five years (39%), with 3% looking for a deal lasting less than a year and 10% expecting the arrangement to survive between five and 10 years.
But the survey shows that outsourcing is certainly not losing popularity. Almost two-thirds of the sample feel outsourcing is either ‘important’ (36%) or ‘very important’ (26%) to their organisation’s IT strategy and most are prepared to put money on it: half (48%) state their company’s spending in this area will increase over the next two years, while a quarter (25%) anticipate investment will remain the same and only 17% expect to reduce their outsourcing budget.
Assessing the ROI on that spend remains problematic, however, with three-quarters of companies finding it either ‘fairly hard’ (54%) or ‘very hard’ (23%) to calculate the financial returns from outsourcing.
Two-thirds of those polled (68%) say they prefer selecting multiple suppliers to opting for a single outsourcer (19%).This trend is set to continue, with three-quarters (77%) indicating they will be going down the multi-sourcing route in the future, compared to 16% who want to stick with one supplier.
Around half (47%) also report trying to transfer from one outsourcing supplier to another at some point, or attempting to re-activate their services internally, although such moves are often characterised as either ‘difficult’ (53%) or ‘very difficult’ (5%).
However, these decisions are not the result of growing dissatisfaction with outsourcers’ performance. Half of the sample reckon their current service level agreements (SLAs) are either met exactly as anticipated (26%) or even exceeded (36%).
Moreover, 10% say there has never been an instance where a supplier has failed to provide a service as specified once the contract begins. A third (33%) maintain such a problem is very rare and 38% state that while this has occasionally happened, it has been possible to find a solution fairly easily. Only a minority (13%) claim this has occurred frequently.
Instead, organisations are concerned about retaining flexibility over their outsourcing deals. Not a single company, for instance, admits to signing a contract intended to last more than 10 years and in most cases time horizons are shrinking.
The majority now expect a contract to cover a period of one to two years (39%) or two to five years (39%), with 3% looking for a deal lasting less than a year and 10% expecting the arrangement to survive between five and 10 years.
But the survey shows that outsourcing is certainly not losing popularity. Almost two-thirds of the sample feel outsourcing is either ‘important’ (36%) or ‘very important’ (26%) to their organisation’s IT strategy and most are prepared to put money on it: half (48%) state their company’s spending in this area will increase over the next two years, while a quarter (25%) anticipate investment will remain the same and only 17% expect to reduce their outsourcing budget.
Assessing the ROI on that spend remains problematic, however, with three-quarters of companies finding it either ‘fairly hard’ (54%) or ‘very hard’ (23%) to calculate the financial returns from outsourcing.