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20 August 2009

Outsourcing Market

The outsourcing market remains immature. 90% of all outsourcing situations have serious shortcomings.

Almost 50% of all projects are seen as a failure.

Alone in the areas of aspect hardware or Technology Refresh 81% of all contracts are unclear; in 48% of the cases these issues are not even mentioned in the contract, whereby the budgets are considerable. Who pays - the Service Provider or the customer?

One source of difficulty in outsourcing are the different process models. ITIL 3 with 36 processes is suitable for just 5 German companies. All other companies are too small, the processes are uneconomically and fall short of Benchmarker Best Practices. Nevertheless, ITIL 2 was still practical for about 100 German companies.

The SME segment has worsened the situation. In case of outsourcing, an ITIL 2 oriented Service Provider can quickly have twice as many staff deployed as the SME has outsourced. Even if a process only has 0.x FTEs (Full Time Equivalents) assigned, they must understand the client and their situation. Within large organizations this communication overhead becomes a cost effectiveness killer.

A Service Provider needs more process models in their organization. Today that is not possible. Some Service Providers give up the SME segment, others agonize their way through. Not many are really happy. This is only reluctantly talked about.

The experience and information exchange among companies is therefore rather pathetic. The reduction of seminars and conference visits for internal staff that has been taking place for many years enhances the effect.

Retained IT is missing in every third outsourcing tender. Hardly anyone starts with a functioning organization.

From this perspective, it becomes clear why the competences and responsibilities of CIOs are being reduced. There is a lack of know-how.