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Nov25
Outsourcing saves money only in first year, not later
Hmm…Gartner analyst Linda Cohen is of the opinion that outsourcing exercise after the very first year does not yield any benefit for the clients. Vnunet writes, One occurrence of how a business fails to cut costs from an outsourcing relationship is in circumstances when service providers buy out the organisation’s infrastructure, argued Cohen in a recent report. The organisations will benefit from the cash and asset transfer in the first year, but after that the value “begins to wane,” Cohen added.

Take her view on this

Long-term infrastructure outsourcing contracts that were signed more than three or four years ago are now frequently costing organisations money, because the infrastructure cost today is so much less expensive than it used to be,” said Cohen. “If the original cost has not been renegotiated to current market-bearing rates, then the service is often overpriced

The problem probably is, organizations keep looking at outsourcing as cost cutting tools. More than gaining access to specialist skills, enhancement of service quality, new value creation, its cost that matters most.

 

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