Study Finds Pitfalls Of Outsourcing

ARLINGTON, Va. -- A new global study by ESI International finds that of the 95 percent of organizations that buy, provide or both buy and provide outsourced services and functions, fewer than half are able to effectively manage the risk of outsourced projects.

Seventy percent of survey respondenst say managing product or service quality is the top outsourcing risk to organizations.

"The ubiquity of project outsourcing creates opportunities for, and demands on, organizations to better develop and refine their outsourcing competencies,” said J. LeRoy Ward, PMP, PgMP, Executive Vice President, Product Strategy and Management, ESI International. “The results of ESI’s global survey indicate areas for greater performance, productivity and competitive advantages through better risk management.”

Although nearly two-thirds of organizations spend up to half of their budgets on outsourcing, they need to refine risk management capabilities. Nineteen percent said their organization isn't very effective at risk assessment of outsourced projects, and 36 percent said their organization is only somewhat effective. Twenty-one percent said their organization is not very effective at risk management, and 33 percent said they are only somewhat effective.

The study also found shortfalls in effectively using requirements management and development, a key area for managing outsourcing risk.

Other risks cited by the survey include vendor delays, contract scope, and poor vendor management. Most respondents indicated that they evaluate vendors' technical ability and past performance, and they issue comprehensive, clearly articulated requests for proposals and quotes. More than half of the organizations acknowledge the need for improvement in their outsourcing capabilities, with additional training and support needs identified in key risk management skills.

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