1. Escalating Costs as Business Changes
Given the long term nature of many outsourcing agreements, most organizations will face major business change whether driven by customer needs, technology developments, political or legislative change. No IT outsourcing contract can foresee what these changes will be and it is therefore not possible to negotiate and agree charges for all eventualities. New and changed requirements can easily lead to escalating costs.
2. Perceived Loss of Flexibility and Control
Services defined at the outset will be covered by the IT outsourcing contract but what about new services and changed requirements that develop over the life of the contract? Service changes have to be negotiated and agreed upon.
3. Outsourcing Provider Concerns
Organizations can become heavily dependent on their IT service provider and this presents various risks:
- The supplier may become financially unstable or even go bankrupt.
- There may be a lack of responsiveness, possibly as the supplier loses interest (or wins more lucrative outsourcing deals).
- Service levels may fall to unacceptable levels.
4. Demotivated IT Professionals
A major concern for any organization considering IT outsourcing has to be the impact on staff in the IT department. A poorly planned IT outsourcing program may lead to a loss of talent and expertise within the organization. Outsourcing can be seen as a threat and a vote of no confidence for the existing IT services staff. IT professionals may feel betrayed or unappreciated. Some will decide to leave and pursue their careers elsewhere and this will increase the pressure on those who stay. This can be demoralizing and demotivating (but it could also be a good thing).
5. Security and Confidentiality Risks
The IT outsourcing relationship is a very intimate one in which the supplier has access to information and other assets that the organization would normally regard as confidential. There is little chance of privacy and few secrets from an outsourcing provider.