One-in-three UK companies affected by outsourcers' failures in past three years, claims Deloitte

British companies more dependent on outsourced partners than firms anywhere else in the world

One-in-three companies in the UK have experienced major disruption or complete failure due to the shortcomings of their outsourcing partners, claims consultants Deloitte in a survey released today.

And just one-in-ten companies has contingency plans ready in case of the failure of an outsourcing provider, it added.

The results come from 107 of British companies questioned in Deloitte's global ‘Third Party Governance And Risk Management survey, which also found that British companies were not only highly dependent on outsourcing, but had one of the world's highest dependencies on outsourcers, at 80 per cent.

"This year's survey results demonstrate that third parties are increasingly relied upon, with this trend likely to increase. Unfortunately, management processes and technology that support the oversight of these relationships are not keeping up, creating an ‘execution gap'," suggested Kristian Park, global extended enterprise risk management partner at Deloitte.

Deloitte recently calculated that third-party failures could cause shareholder losses averaging more than 2.5 per cent - outstripping worst-case scenario regulatory fines by up to 10 times in most cases. Historically, this has ranged from £1.3m to £35m, reaching £650m for internationally-operating firms subject to global regulation, claimed Deloitte.

"It is shocking to see the rate at which UK businesses have been failed by contractors," said Alex Guillen, go-to-market manager at services company Insight UK. "In a world where organisations are undertaking their own digital transformation journey in order to stay competitive, it's essential the ecosystem is working right for everyone in it."

Guillen cited Insight's work with communications company Colt DCS, the data centre arm of Colt Communications, as an example of how it ought to be done.

"They were in need of an upgrade to their IT infrastructure - in just seven days... We coordinated the project using the Agile Scrum method, and set up daily communications between one of our Partners, SystemsUp, and the engineering team at Colt DCS to ensure the project was kept on track.

"It was this collaborative way of working that allowed for key workflows and systems to be built quickly. In fact, by the end of day one, all virtual machines had been built, and by the afternoon of day two the network was in place.

"Whatever the method used, having a clear strategy from the outset and constant communications throughout is essential to the running of any project, and crucial to organisations preparations for a digital tomorrow," said Guillen.

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