Chennai: Even as they agree about the positive role played by service providers, a large number of outsourcers are not able to quantify the actual benefits derived out of contracting deals says a KPMG International survey. The organisation surveyed 659 companies across the world. Nearly half of all respondents had an annual turnover of more than $1 billion. Over 80 per cent of the sourcing contracts covered by the survey refer to information technology outsourcing (ITO), 17 per cent to business processes outsourcing (BPO) and two per cent to knowledge processes outsourcing (KPO).

According to the survey, companies are now increasingly looking towards sourcing to provide tangible business benefits. The evolution of sourcing has created immense advantages for businesses that deploy and manage them effectively.

Commenting on the survey, Egidio Zarrella, global partner in charge, IT Advisory, KPMG, said, "Personally, I'm glad to hear that businesses feel that their sourcing arrangements are working as it was all too easy in outsourcing's formative years to dismiss it as something which was never properly delivered. However, businesses have to be able to substantiate the benefits which outsourcing delivers. Simply going on a gut feel or anecdotal evidence is not enough."

He added, "Significant opportunities do exist for organisations to capitalise on the strategic value of outsourcing. This potential can be unlocked by a more consistent measurement of contract provisions and other metrics about the relationship with the service provider."

Despite the fact that outsourcing is now a widely accepted business practice, KPMG survey brings to light some problems, which companies claim to be suffering from regarding their outsourcing arrangements. A formal strategic measurement framework does not support 42 per cent of outsourcing arrangements. Almost two third's of the respondents interviewed either tracked benefits at an elementary level or did not track benefits at all. 72 per cent of the customers reported that they do not have the benchmark for measuring the success or failure of their sourcing arrangements.

Speaking on the occasion of the survey release in India, Pradeep Udhas, global partner in charge, Sourcing Advisory, KPMG said "Sourcing is as important as selling for organisations, as it not only impacts profitability, but also makes it much more nimble in today's dynamic environment".

Key Findings:

• 42 per cent of organisations believe their sourcing contract has definitely improved financial performance
• 27 per cent said it has definitely improved their competitiveness.
• 72 per cent of customers reported that they do not have, or share with their service providers, criteria for measuring the success or failure of their sourcing arrangement.
• As many as 59 per cent of organisations interviewed either tracked benefits for IT projects at an elementary level, or did not track benefits at all
• 79 per cent of respondents did not accurately know the costs of selecting a service provider
• 14 per cent of respondents said they had a significant misalignment of financial and commercial expectations with their service provider