The cost of information technology, outsourcing involves more than the provider charges, but how much of this additional cost is really necessary? Survey of 50 outsourcing efforts shows that companies generally do not know the costs associated with such activities, as a transition to a new supplier, and, therefore, as a rule, do not take measures to reduce them. Jerome Barthelemy from Audencia Nantes School of Management in France looks at four types of hidden costs that can undermine the benefits the company expects from outsourcing. Drawing on lessons learned from the interview of the company, he provides anecdotes that show how the choice of a company can lead to high hidden costs. When looking for a supplier, for example, companies often try to spend as little as possible. However, spending more on research stage reduces the hidden costs of outsourcing around the efforts and saves significant costs later. Companies should include specific items in the contract, to choose a reliable supplier, and be confident in the role of provider. Another hidden cost due to the transition of the supplier. This cost is elusive because it is incurred unless the provider does not fully passed on in-house IT department. Determines the nature of the outsourcing of most of this cost. Cost management outsourcing effort can be significant, but companies usually overlook it. Even spending the money to hire consultants, IT outsourcing experience can be less expensive than the high cost of transporting and guarding contract renegotiation provider to obtain the desired performance. The last category of hidden costs due to switch suppliers or reintegration outsourcing activities. Many managers see the end of the outsourcing agreement, which includes strategic activities, such as denial and awkward preparation for this cost. Simple precautions, including such as reversibility clause in the contract, it may help to reduce the problem. "Hide
by Jerome Barthelemy Source: MIT Sloan Management Review 12 pages. Publication Date: April 1, 2001. Prod. #: SMR065-PDF-ENG
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