BPO Paradox?

The fundamental value premise of BPO is greater organizational flexibility and process efficiency with reduced costs of ownership. However, 70% of the participants in a recent survey by Deloitte Consulting ("Calling for a Change in the Outsourcing Market", April 2005) said that they had significant negative experiences with outsourcing projects and now exercise greater caution in approaching such deals. The study states that although outsourcing is largely driven by cost-related objectives, firms experience hidden costs related to contract administration, profit margins, and in-house management. Therefore, the management of BPO relationships was more complex, expensive and time-consuming than anticipated. Such complexity calls into question the potential of BPO as a strategic driver for organizational cost savings and flexibility. BPO Paradox?