Study: IT Outsourcing Is Out of Hand
Businesses that outsource IT work must keep a close eye on the firms they hire, new research suggests.
A survey from Lieberman Software Corporation shows 77 percent of IT professionals who work in organizations that outsource say those they’ve hired have made up work to get extra money.
While overcharging clients has been a longstanding practice for some outsourcing companies, Philip Lieberman, President and CEO of Lieberman Software, said he hadn’t anticipated so many people acknowledging their frustration with it.
“I was very surprised – not so much that there was overcharging, but that clients would disclose contractor abuse in such high numbers,” Lieberman told IT TechNewsDaily. “I was always under the impression that customers did not think this was a big deal, but from the report, it appears otherwise.”
The made-up work is leading to bills that many clients weren’t expecting. Sixty-two percent of survey respondents said their outsourcing agreements had cost them more than they’d anticipated based on their original plans, with 27 percent saying it cost significantly more than expected. Only 11 percent said they paid less than they had planned.
“In effect, the entire paradigm that outsourcing would save money and hassles has turned out to be exactly the opposite for many companies after they have switched over,” Lieberman said.
To preventover-billing practices, which can include things like avoidingnew technology that reduces some billable charges, Lieberman suggests reestablishing a strong in-house IT department.
“Unfortunately, many companies have gone so far in outsourcing, they no longer have their own IT employees or, in some cases, even IT management,” Lieberman said. “The solution is to back up and rehire your own employees to evaluate better solutions and processes.”
Making sure the outsourcer is not in charge of choosing which vendors to hire is also a good way to keep closer tabs on the work of outsourcers, Lieberman said.
“I strongly suggest that you never farm out or allow your contractors to pick the vendors and products they believe best,” he said. “Invariably, they pick the worst, or no solution (at all)to assure maximum billable charges.”
Finally, he said, sign contracts that provide flexibility in labor usage to ensure the company is not locked into current processes if better technology becomes available.
The survey took place at Infosecurity Europe 2011 and RSA Conference 2011. Nearly 500 IT professionals participated, all of whom were partly or wholly responsible for an outsourcing function in their organizations. Many came from Fortune 100 companies.