While the vast majority of companies buy, provide or both buy and provide outsourced services and functions, fewer than half are able to effectively manage risk of outsourced projects, a global study has found.

Managing product or service quality is the top outsourcing risk to organisations, identified by 70 per cent of respondents in the ESI International survey, which took in 615 contractor managers, subcontractor buyers, project managers and senior executives across North and South America, UK/Europe, Asia/Pacific, the Middle East and India.

With nearly two-thirds of organisations spending up to half of their budgets on outsourcing, the survey pointed to a need to refine risk management capabilities in order to positively impact bottom line performance.

It found that 19 per cent are not very effective at risk assessment of outsourced projects while only 39 per cent said that their organisation has a strong risk management culture.

Companies also indicated shortfalls effectively using requirements management and development – a critical area for managing outsourcing risk.

The survey found that 75 per cent of organisations do not always clearly define requirements of outsourced projects, which serve as the foundation of successful project management, while only one-third always clearly articulate and define financial goals to outsourcing partners.

Further, more than half of organisations acknowledge the need for improvement in their outsourcing capabilities, with additional training and support needs identified in key risk management skills.

The top areas in which companies can use more training and information include risk management (61 per cent), risk assessment (53 per cent), managing quality of service in outsourcing (51 per cent), requirements management and development (49 per cent) and best practices around project outsourcing (47 per cent).

Only half of companies agreed that outsourcing team members have appropriate project management experience and skills.

The survey also pointed to a greater focus on ensuring vendor performance and contract outcomes.

Of the top risks that concern organisations when outsourcing projects, vendor delays were highlighted by 63 per cent of companies, followed by clearly defined contract scope (61 per cent) and poor vendor management (50 per cent).

Furthermore, 76 per cent of organisations evaluate vendors’ technical ability and past performance while 65 per cent said they issue comprehensive, clearly articulated requests for proposals/requests for quotes/tenders that enable standardised responses for comparable analysis.