Canada lags on outsourcing ROI

CANADIAN COMPANIES ARE LAGGING BEHIND THEIR GLOBAL PEERS when it comes to reaping the financial benefits of IT and business-related outsourcing projects, according to a recent Deloitte Consulting report.

The global survey of about 300 corporations and outsourcing service providers found that Canadian businesses only experience a 15 per cent return on investment from their outsourcing projects compared to the global average of 25 per cent. The consultancy said that a lack of maturity in the Canadian market has led to poor planning and an over-emphasis on cost reduction for many outsourcing initiatives.

“Canadian companies on the whole are less mature than U.S. or U.K. outsourcing clients,” said Michael Hart, managing specialist for outsourcing advisory services practice at Deloitte. “Canadian organizations, for the most part, are less inclined to put up big investments when developing their business case and determining what their total cost of ownership should be.” According to Hart, about 50 per cent of surveyed companies said they have outsourcing deals in place, but are still having trouble with vendor staff and technology.

In Canada only 60 per cent of survey participants said they were satisfied with their outsourcing services. The fact that many companies do not have a well defined outsourcing landscape plays a major role in the dissatisfaction these companies experience in their projects, Hart said

“The first thing companies need to do is examine how their outsourcing strategy affects their overall competitive situation in the market,” he added. “Have they carefully thought through their outsourcing initiatives? And are those initiatives aligning and supporting their company’s strategic direction?”

Deloitte said that transferring a dysfunctional operation to a vendor in the hopes of saving money is a sure-fire recipe for disaster. The creation of a business case and the establishment of effective service level agreements should be of paramount importance to Canadian firms.

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Jim Love, Chief Content Officer, IT World Canada

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