Results from Affiliated Computer Services, recently acquired by Xerox for $6.4 billion, will today provide a signal of performance in the IT outsourcing sector. IT outsourcing to foreign vendors (IT offshoring) has seen tremendous growth in the past decade. Several recent large-scale acquisitions foretell fast growth in the sector. However, for all parties to these transactions, familiarity with associated risks is crucial.
Uneven performance. Recent studies suggest too much enthusiasm and too little caution in mainstream depictions of the industry. A survey of Fortune 500 companies found that 50% of companies reported that they regularly encountered multiple problems per month. A different survey found that 25% of all offshore outsourcing ventures failed to generate expected costs savings; another 25% actually led to increased costs relative to comparable in-house performance. Fully 30% of ventures were eventually judged failures and the contracts either canceled or not renewed.
