A Third of Firms Not Measuring Outsourcing ROI
Results of research by Cognizant in conjunction with Warwick Business School, carried out among chief information officers (CIOs) and chief financial officers (CFOs) across five regions (the UK, Germany, Switzerland, Benelux, France and the Nordics), has highlighted how business leaders are not getting to grips with measuring the full financial impact of the outsourcing contracts they commission. This is despite spending more than US$42bn on outsourcing deals in 2008.
The survey, carried out across Europe’s biggest companies, shows that less than half of all CIOs & CFOs (43%) have attempted to calculate the financial impact of outsourcing to their bottom line. More than a third (37%) admit they do not try to measure the returns, while a further fifth (20%) do not know whether they have tried. Of those who have tried to calculate the full value of outsourced business arrangements they commission, less than one in five of all CFOs and CIOs polled are very confident in their quantification.
CIO and CFO decision-making on future business strategies is being made without knowledge of the financial benefits: 78% of those who to cut back on outsourcing last year cited ‘unclear value for money’, but without any clear evidence or means to quantify the decision.
The research also highlights that CFOs could be better served by increased awareness around outsourcing’s impact from their CIO colleagues. Only 37% respondents admit to being happy with their CIO’s ability to communicate the benefits back to the business.
“The report flags a critical gap in managerial knowledge, and some businesses clearly have to do better in justifying their significant outsourcing spend to the board. A combination of proven methodology, industry expertise, and tight integration of businesses strategy into outsourcing objectives to effectively measure, improve and communicate outsourcing’s true impact is required to ensure outsourcing delivers on its promises,” commented Julia Kotlarsky, associate professor of information systems, Warwick Business School.