Outsourcing holds market captive

Companies which have outsourced key processes are being discouraged from changing suppliers or bringing processes back in-house by the complexity of the process. The survey, by OTR Group, found that about 65 per cent of respondents would consider changing outsourcing suppliers if the process were risk-free.

However, only a small number – less than 1 per cent – of large European outsourcing contracts were cancelled and brought in-house, and these were largely as a result of unexpected reorganisations or mergers. Those contracts that were relet normally went to the same supplier. The report notes that reletting or cancelling a contact normally requires at least a year of preparation.

Suppliers are accused of using delaying tactics to prevent shifting, or of binding the client’s process so intimately with their own administration that it becomes impossible to disentangle. The report also notes client suspicion of “partnership” concepts fashionable among suppliers. These were viewed as a means of achieving high margins and lock-in at renewal.

The outsourcing market is still growing, but at a slower rate. Companies which had intended to bring outsourced services back in house have changed their minds, overturning earlier predictions of a decline in outsourcing in 1997.