Many of the world's largest organisations which outsourced services like travel are bringing them back in-house again according to a survey by Deloitte Consulting.
Lack of expected savings, loss of control, hidden costs, confidentiality issues, loss of bargaining powers and the quality of staff at the agency handling the outsourced service were among the reasons cited for the about turn.
The survey, Calling for a Change in the Outsourcing Market, questioned executives from 25 top organisations throughout the world. 70% said they had had “significant negative experiences” with outsourcing and 64% said they had brought outsourced services back in-house.
Of 50 “problem” deals, 32% had gone to litigation, 44% had been terminated and a further 20% were “at risk,” according to the report.
Ken Landis, a senior strategy principal at Deloitte, said: “There are fundamental differences between product outsourcing and the outsourcing of service functions, differences that were overlooked but have now come to the fore.
“Outsourcing vendors and companies may have conflicting objectives, putting at risk clients' desire for innovation, cost savings, and quality.
“Moreover, the structural advantages envisioned do not always translate into cheaper, better, or faster services.
“As a result, larger companies are scrutinizing new outsourcing deals more closely, re-negotiating existing agreements, and bringing functions back in-house with increasing frequency.”
Among the other findings were that organisations outsourcing services found much more management was required so executives could not be freed up for other projects as expected, that they had “limited or no transparency” of the agency's pricing structure and that they had no standard by which to evaluate the agency's performance.
There has been considerable outsourcing of travel management by many companies both in Europe and the USA. However there have also been warnings about its possible consequences.
Aaron Gellman, professor of management strategy at the transportation center, Kellogs School of management, Northwest University, warned at last October's ACTE Global forum that companies were having doubts about outsourcing, citing, among other reasons, worries over data security.