Outsourcing falling from favour.

Many of the world's largest organizations that were quick to participate in information technology and business process outsourcing are bringing operations back in-house and exploring alternatives, according to a new study released recently by Deloitte Consulting LLP, an associated partnership

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The study, Calling a Change in the Outsourcing Market, reveals that 70% of participants have had significant negative experiences with outsourcing projects and are now approaching them with greater caution. One in four participants have brought functions back in-house after realizing that they could be addressed more successfully and/or at a lower cost internally, while 44% didn't see cost savings materialize with an outsourcing implementation.

Moreover, 57% of participants absorbed costs for services they believed were included in the contracts with vendors. Nearly half of the study participants identified hidden costs as the most common problem when managing outsourcing projects.

"There are fundamental differences between product outsourcing and the outsourcing of service functions, differences that were overlooked but have now come to the fore," says Ken Landis, a senior strategy principal at Deloitte. "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."

For more information visit www.deloitte.com.