Companies are failing to quantify the benefits gained from outsourcing deals, meaning they are missing key business objectives. A significant proportion (42 per cent) of outsourcing deals have no formal way of measuring performance, according to consultancy KPMG International. Simply going on 'gut feel or anecdotal evidence' is not enough, said a KPMG report. Speaking to silicon.com Alan Dion, director in KPMG's sourcing practice explained how cost cutting and service level agreements "don't usually relate to the broader business objectives".

He added that if an outsourcing deal is intended to speed up application development, it should do this rather than meet irrelevant technical details. Dion said reasons for these differences include IT staff - who often drive deals - being unfamiliar with business needs. Outsourcing contractors may deliver to a contract but fail to fulfil business needs. Postcards from the bleeding edge… Read the latest missive from tech guru and silicon.com columnist, Peter Cochrane, as he blogs from around the world.

Dion said companies need to measure their business aims against the services they receive using a 'balanced scorecard'. In this way organisations can build up a picture of how outsourcing services are really performing. But Dion added: "The majority of deals work." This is supported by the fact that 89 per cent of businesses surveyed expect to maintain or increase outsourcing levels, with only 14 per cent saying their expectations of outsourcing differed from the service delivered. The research covered 659 companies around the world, half of which have annual revenue exceeding $1bn.