The hidden costs of outsourcing

Buyer beware: The transactional nature of outsourcing relationships could leave your organization exposed to charges you hadn’t bargained for. Here’s what to watch out for.

The hidden costs of outsourcing
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One of the biggest mistakes an IT organization can make when outsourcing is failing to consider the total cost of the relationship — including all the hidden costs that are likely to accrue. There has been little incentive to date for service providers to bring these looming financial risks out into the open, so customers much be diligent about identifying these additional expenses in order to manage or eliminate them.

“Motivated customers can take this a step further and press their potential providers for greater transparency in the sourcing process. If you want to avoid unexpected costs cropping up, push your vendor to be clear about what's included and what to expect if the engagement flexes or scales,” says Phil Fersht, CEO of outsourcing advisory and research firm HfS Research. “More importantly, the whole industry needs to get past its transactional heritage and start pushing towards genuine partnerships that are invested in mutual success.”

Until the sector evolves, however, the onus is on the buyer to beware. To that end, here are some of the most common hidden costs likely to emerge during the course of an outsourcing engagement.

Lax demand management

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