Businesses fail to calculate impact of outsourcing, finds Cognizant study

Outsourcing in its various forms is now an established part of all pharmaceutical operations, but in spite of spending more than US$42bn on outsourcing deals last year, research by consultant Cognizant has found that only 8% of respondents were confident they knew what their company spends on outsourcing.

In addition, less than half of CIOs and CFOs (43%) have tried to calculate the impact of outsourcing to their business. Of those who have tried to quantify the benefits, only 19% are confident about their calculations.

Only 37% of CFOs rate their CIO's ability to communicate outsourcing's benefit to the business and more than 50% expect to see ROI from their investment within a year.

The research, conducted by Cognizant in association with Warwick Business School in the UK from April to July this year, is based on conversations with more than 250 European CIOs and CFOs from the world's largest companies across a variety of sectors. Pharmaceutical companies accounted for 6% of the sector breakdown. All companies had revenues in excess of US$500m.

The research was conducted in five regions (the UK, Germany, Switzerland, Benelux, France and the Nordics).

The majority of respondents spend between US$5-$100m million annually on outsourcing (29% more than $50m), but measurement methods remain vague at best, the study has found.

Sanjiv Gossain, vice president and UK and Ireland md of Cognizant, said: "Outsourcing has clear long- and short-term benefits for businesses, but the research shows many companies could be missing out by failing adequately to measure outsourcing's impact.

"Senior executives appear to be making outsourcing decisions based upon short-term cost cutting - which remains crucial - but outsourcing's impact stretches well beyond the initial labour, skills and cost advantages."