| Companies say they entered an outsourcing | | | | cost. The best they can do is report transition |
| agreement believing that they understood all | | | | time; a measure offering only limited insight into |
| major costs. They agree that some amount was | | | | what drives transition cost. |
| needed for activities such as finding a vendor, | | | | Managing the effort |
| drafting the contract and managing the effort, but | | | | A company knows what it pays to the vendor. |
| they think the amount would be negligible - in | | | | Indeed, many businesses outsource to find out |
| some cases, they halved or even cancelled out | | | | how much they pay for IT. Management costs, in |
| the company's potential savings from outsourcing. | | | | contrast, are purely internal. Because of the costs' |
| Vendor search and contracting | | | | relative obscurity, many companies do not take |
| Many enterprises underestimate the expense to | | | | them into account until they become visible - |
| identify and evaluate suitable IT vendors, select a | | | | usually when the overall outsourcing cost has |
| finalist, and negotiate and draft the contract. | | | | noticeably escalated. |
| Companies incur such costs before spending the | | | | Transitioning after outsourcing |
| first dollar on the actual work. Additional time and | | | | The fourth hidden cost comes from switching |
| expense early on helps avoid problems later, such | | | | vendors or reintegrating activities internally. Most |
| as having to renegotiate the contract or | | | | managers are reluctant to think about the end of |
| constantly monitor the vendor to get the needed | | | | the contract. Outsourcing to focus on a |
| performance. | | | | company's core business or to cut costs is |
| Transition to the vendor | | | | generally meant to be permanent. Companies do |
| Most companies do not realize how much they | | | | not plan to reintegrate. Even switching vendors is |
| have spent until the transition is complete. It can | | | | a move they prefer to avoid. Thus, regardless of |
| take months before the vendor knows as much | | | | how the contract ends, the end signifies a failed |
| as the internal IT department, and it is hard to | | | | outsourcing effort. Most managers find it hard to |
| say exactly when the vendor has taken over. | | | | consider that possibility. |
| Most managers are unable to analyse transition | | | | |