It is common knowledge that there is a high failure rate in IT outsourcing. It is estimated that 25% of all outsourcing contracts end up in failure, with hundreds of millions of pounds being wasted.
Headline mega failures have involved some of the biggest players in the business, such as IBM, with the failure of their 5 billion dollar contract with JP Morgan. Then there is EDS who had to write off more than $500m following its failed IT contract with The US Navy.
Nearer to home, we constantly read about IT outsourcing failures in commercial organisations, especially in the banking sector, such as the ongoing Royal Bank of Scotland IT fiasco.
IT Outsourcing In The Public Sector
In the UK public sector, there are also numerous instances of IT disasters with local authorities, such as the recent cancellation of a £160M contract between Cornwall County Council and BT, which was scrapped, only 2 years into its 10-year duration.
Then we have the costly IT failures within the UK Government itself. Head of the list is ATOS, who has continually failed to deliver on its commitments, prompting the Government to review more than £500M worth of IT contracts it holds with the European IT giant.
The list is endless: The Universal Credit Scheme rollout, the failed £60M Scottish Police IT project, and so on.
Never has there been a time to be extremely circumspect in your selection of the right IT partner. Whatever your IT needs may be, failure to engage the right company will cost you dear in terms of financial outlay and future performance. In extreme cases it can lead the collapse of businesses or the overhaul, (including staff dismissals) of a public department.
Why Do IT Outsourcing Partnerships Fail?
The first step in finding an IT partner that is right for you is to understand the reasons why so many IT outsourcing partnerships fail.
Here is an honest and forthright list of the “ten reasons for failure” that I have put together to help with your selection. My list sets out many of the common mistakes and errors that are frequently made on both sides of the partnership.
Let’s not forget – it is a two-way partnership in which both parties have crucial roles to play. Both sides must take their share of the blame if things go wrong.
#1: Choosing the lowest price and squeezing the IT outsourcing provider’s profit margins. If your main contract criterion is to choose the cheapest IT company, you will almost certainly get what you pay for. Many businesses opt to outsource to cheaper offshore companies without considering the problems that may lie ahead, in terms of communication issues, quality of staff, and cultural aspects.
Consider carefully ho