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Experts are warning companies need to assess the risks of IT outsourcing because of uncertainty over the delivery of business value and the expected level of business transformation. This is despite an appearance in the UK that suggests third party IT outsourcing as a business model has matured. Instead, experts at consultancy firm, Deloitte, argue that organisations in both public and private sectors need a process of regular assurance from their external partners. Most likely this is based on the fact that more than half of CIOs (56%) said they were unsure if outsourcing business activities to drive value was actually better than providing the service themselves in-house. David Viles, of Deloitte’s Enterprise Risk Services, said such a “strategic uncertainty” through outsourcing IT services to a third party potentially puts a company’s reputation at risk - if suppliers or partners let it down. He said that damage to an organisation’s reputation is currently the most neglected key risk area in outsourcing, which effectively deserves a system of “ongoing assurance” between business and its third party. With a rigorous system in place, Viles argues businesses can manage their external relationships and reputation more effectively, while allowing legal and working arrangements to be adjusted as the partnership evolves. If companies outsourcing IT can ensure a “rigorous process” with their partners, they are tipped to benefit from a better withdrawal from agreements - before things go wrong, as well as having more comeback to make claims arising from legal disputes. “To safeguard reputation when outsourcing it is important to carry out a reputation risk management exercise to break down the key components of reputation and assess how these might be affected by IT service issues,” advises Mr Viles. Writing in the Financial Times, he said that CIOs and businesses should then work out “how best to mitigate any risks should suppliers or partners let you down.” According to Deloitte, these issues are a “matter of urgent priority” because if business partners are too risky and no value is added to the original organisation, then “it’s difficult to see the business case for outsourcing.” The advice comes after a study by PricewaterhouseCoopers, the consultancy firm, and USA Today, found that nearly 40 per cent of Silicon Valley start-ups employ staff overseas. Feb 24, 2005 Email this article Printer friendly page Previous Page
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