Managers under pressure to cut outsourcing costs

The recession is placing IT and business managers under increasing board pressure to find second- and third-round cost savings from outsourcing deals, but many are struggling to do so, according to a new study by Compass Management Consulting.

Managers are likely to have already made cuts wherever possible, the research found, making further savings hard to achieve.

Rather than indiscriminate and unsustainable cost cutting, organisations are encouraged to model costs and benefits in a way that reduces costs.

It is also important not to make cuts too deep, according to Compass, as this risks impairing operational efficiency, which needs to be maintained so that companies can take advantage when demand begins to rise again.

"Shareholders need confidence that cost reduction programmes are going to generate sustainable savings and not have unintended consequences on sales and customer service," said Paul Teather, Compass managing director.

"This is why the best performing companies are instituting fundamental change in their business, including challenging levels of demand and implementing new governance structures for their IT and operations."

Following industry best practices and careful analysis of an organisation's operations could yield cost savings of up to 20 per cent in areas such as storage, software and telecoms, said the firm.