{"id":494,"date":"2006-07-11T01:00:04","date_gmt":"2006-07-11T09:00:04","guid":{"rendered":"https:\/\/systematichr.com\/?p=494"},"modified":"2006-07-11T04:15:50","modified_gmt":"2006-07-11T12:15:50","slug":"how-much-can-outsourcing-really-save","status":"publish","type":"post","link":"https:\/\/systematichr.com\/?p=494","title":{"rendered":"How Much Can Outsourcing Really Save?"},"content":{"rendered":"

I set this article<\/a> aside some time ago with the intention of commenting on it at some point.\u00a0 Now is as good a time as any.<\/p>\n

The story, \u201cSurvey: Outsourcing saves less than claimed\u201d<\/a> is based on a survey conducted by TPI<\/a>.\u00a0 The gist of the story is summed up in the lead:<\/p>\n

\u201cOutsourcing of information technology and business services delivers average cost savings of 15 percent, a survey found on Thursday, disproving market claims that outsourcing can reduce costs by more than 60 percent.”<\/p>\n

Now I don\u2019t know about anyone out there reading this blog, but I\u2019ve never really heard claims of 60% savings through outsourcing.\u00a0 So I went to Google and started looking for myself.\u00a0 Then I went to Yahoo and continued looking; and darned if I couldn\u2019t find any study or article or blog entry or anything claiming that companies can save more than 60% through outsourcing.<\/p>\n

In all, I tried about 20 search strings.\u00a0 Now granted, some of the searches yielded a lot of results, but the first few pages didn\u2019t show anything so I moved on.\u00a0 If any of the 1.2 million people reading this article can cite a study claiming such huge savings, please let the rest of us know.\u00a0 And when you do, you\u2019ll win the door prize for most effective web search guru.\u00a0 Of course, people do tend to exaggerate at times.\u00a0 For instance, I know that just slightly over 800,000 people are reading this now.\u00a0 That\u2019s nowhere near 1.2 million.\u00a0 So maybe our friends at TPI were just exaggerating.\u00a0<\/p>\n

Maybe they\u2019ve seen claims of massive savings from offshoring (for a refresher on the difference between offshoring and outsourcing, click here<\/a>).\u00a0 I hesitate to believe that TPI, one of the leaders in the sourcing consulting business, would confuse offshoring with outsourcing. \u00a0But even if they did, I found this article which claims<\/a> \u201cthat India\u2019s wage rate for computer programmers is 15% that of a programmer in the United States. But in that same article, we hear from an industry expert that \u2018Realistically, a company might expect to save about 20% through outsourcing.\u2019\u201d\u00a0<\/p>\n

The TPI study article goes on to say that \u201csavings range between 10 percent and 39 percent, with the average level at 15 percent.\u00a0 These are very interesting numbers to me.\u00a0 Why?\u00a0 Because I have conducted three Total Cost of Ownership (TCO) studies over the past three years.\u00a0 In all, over 260 companies have participated.\u00a0 Each of the companies had over 1,000 employees.\u00a0 In other words, these weren\u2019t small companies.<\/p>\n

The studies looked at the TCOs of delivering payroll services, HRIS, and benefits administration in both the inhouse and outsourced environments.\u00a0 In the weeks to come, I will write more about TCO and the studies specifically.\u00a0 What I want to point out today is that the studies showed that on average, outsourcing saved 17% on benefits administration and 37.5% on payroll administration.\u00a0 The TPI numbers, as I said are very interesting to me.\u00a0 They validate what I have seen with my own research.<\/p>\n

For goodness sake, the \u201cLift and Shift\u201d BPO outsourcing model typically goes for a cost minus 15%- 20%.\u00a0 So where does that 60% claim come from?\u00a0 Maybe it was just an uninformed middle manager at a company that was in the process of outsourcing who made the claim.\u00a0 Maybe it was a bad business case someone once saw.<\/p>\n

Wherever it came from, the healine Survey: Outsourcing saves less than claimed<\/em> does everyone a diservice.\u00a0<\/p>\n

Headlines like this really get to me for many reasons.\u00a0 I\u2019ll talk about these in the weeks to come as well, but the biggest reason is that very frequently, the most effective outsourcing is really cost neutral as savings which are realized can be very effectively \u201creinvested\u201d in the transformation of the HR function. \u00a0And especially important in the success of any major outsourcing initiative is the proper management of expectations.\u00a0 How many people out there see this headline and simply think outsourcing really doesn\u2019t help companies achieve their goals?<\/p>\n

Shame, really.\u00a0 Maybe someone out there can shed some light on this 60% claim and together – 800,000 strong – we can educate the public on the real benefits that outsourcing can bring when done right!<\/p>\n

About the author \u2013 Donald Glade is President and Founder of <\/em>Sourcing Analytics, Inc.<\/a><\/em>, an independent consulting firm specializing in helping companies optimize their HR \/ benefits \/ payroll service partnerships through relationship management, financial analysis, and process improvement.<\/em><\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

I set this article aside some time ago with the intention of commenting on it at some point.\u00a0 Now is as good a time as any. The story, \u201cSurvey: Outsourcing saves less than claimed\u201d is based on a survey conducted…<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[8,17,22,31,11,35,36,3],"tags":[],"class_list":["post-494","post","type-post","status-publish","format-standard","hentry","category-strategies","category-hro","category-industry-news","category-outsourcing","category-service-delivery","category-tco","category-vendor-management","category-vendors"],"_links":{"self":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/posts\/494","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=494"}],"version-history":[{"count":0,"href":"https:\/\/systematichr.com\/index.php?rest_route=\/wp\/v2\/posts\/494\/revisions"}],"wp:attachment":[{"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=494"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=494"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/systematichr.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=494"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}