Just 28 per cent of organisations believe that IT outsourcing can deliver major cost savings, research suggests.

User group NCC's Benchmark of IT Strategy 2005 surveyed 300 technology decision-makers on the perceived benefits and disadvantages of outsourcing.

Michael Dean, NCC's director of membership, says the survey shows that companies rushed to outsource processes in the 1990s to cut costs, but are now reconsidering their options.

'For many organisations, cost is no longer the most significant benefit,' he said. 'Outsourcing has matured and, over time, perceived cost savings can be eroded by increased management time and poorly-envisioned contracts.'

More than half of respondents saw loss of internal knowledge as a major disadvantage of outsourcing, while 41 per cent cited lower quality of service, nearly twice the number (23 per cent) from NCC's 2003 research.

Almost three-quarters of respondents indicated that they have no plans to outsource any IT functions in the next two years.

The results tally with other recent reports into sourcing, which show how some IT directors are increasingly bringing control of systems back in-house (Computing, 12 May).