'Outsourcing customers' dissatisfaction increasing

Buyers of outsourcing services are getting dissatisfied with offshore service providers, prematurely terminating contracts and struggling to harvest the full value of their outsourcing relationships, according to a recent study.

However, many of those same companies plan to increase their level of outsourcing over the next 12 months, the study by Chicago based management consulting firm, DiamondCluster International showed.

The number of buyers prematurely terminating an outsourcing relationship has doubled to 51 per cent while the number of buyers satisfied with their offshoring providers has plummeted from 79 per cent to 62 per cent.

China will be emerging as next outsourcing hot spot. In 2004, only six percent of survey respondents said they planned to establish offshore operations in China. Today, that number has soared to 40 percent, the study says.

"China is starting to look like India did 10 years ago," Tom Weakland, who leads the outsourcing advisory services practice at DiamondCluster, said.

"As outsourcing capability in China takes off, it will put deflationary pressure on the traditional providers of commoditised outsourcing services and set an entirely new price point. The most aggressive providers are establishing operations in China now to grab market share. Taking a wait-and- see approach is not an option," he said.

Countries that appeared to have fallen out of favour, the study said, were Israel and Russia.