According to Gartner, companies that outsource services purely to cut costs are likely to set themselves up for short-term gains and long-term criticisms from management. Gartner research shows that reducing cost remains one of the primary drivers for outsourcing, but placing too much emphasis on cost reduction usually leads to dissatisfaction because many savings are either unsustainable or never achieved.

"At the beginning of a large outsourcing programme, organisations can expect the service provider to offer economies of scale that most individual companies cannot secure themselves," said Linda Cohen, vice- president and distinguished analyst at Gartner. "However you can only expect to receive that cash infusion once; by the second or third year, those 'economies' are forgotten about, the people originally involved have moved on and all too often the value of the relationship begins to wane."

Cohen advised that any organisation considering outsourcing an IT function must first establish realistic goals that will satisfy the executive sponsors of outsourcing, as well as the best interests of the organisation. Only then can the correct scope of work and proper terms and conditions be constructed to deliver long-term value.

Gartner's research shows that the five major, realistic goals for outsourcing are to control cost over time, to provide access to highly skilled technical resources as needed, to enable the internal IT organisation to refocus on mission-critical, business-differentiating services to provide a higher level of strategic value to the business units, and to increase the quality of service delivery.

"There is no doubt that cost is a significant factor in any outsourcing arrangement," said Cohen. "However, organisations need to take a longer term view of what an outsourcing relationship can accomplish for their operations overall."