New Study Claims Outsourcing Has Hidden Costs, Is More Expensive Than Insourcing

IT outsourcing comes with several hidden costs that make them far more expensive and risky than insourcing, a new Socitm study has revealed.

Socitm, a group of public and third sector ICT managers, has warned local government authorities that IT outsourcing does not always save money and could hinder their operations financially in the long run.

According to an article on The Guardian, a report titled Costs of Outsourcing – Uncovering the Real Risks, Socitm compared the costs between outsourcing and in-house implementation of IT projects.

The organisation found that outsourcing an IT project came with certain hidden costs that made it more expensive than in-sourcing.

For example, even though outsourcing will incur similar costs, it will add additional charges to the total cost. These additional charges include risk premiums, high cost of borrowing in the private sector and the cost of tendering. Above all, third-party individuals and agencies are looking for a profit margin of their own.

"Even smaller organisations that need to gain economies of scale, and struggle to keep up to date with technological development, should consider collaboration and sharing with other local public services as a genuine alternative," said Martin Greenwood.