Cost Savings Expectations

More from the MITA Deloitte presentation mentioned in my last post. The Deloitte study on LCCS (Low-Cost Country Sourcing) found the following levels of expected savings:

6-10% savings - 7% of respondents
11-15% savings - 14% of respondents
16-20% savings - 0% of respondents
21-25% savings - 43% of respondents
25-30% savings - 21% of respondents
>30% savings - 14% of respondents

The actual level of reported savings for these companies was:

6-10% savings - 21% of respondents
11-15% savings - 14% of respondents
16-20% savings - 29% of respondents
21-25% savings - 21% of respondents
25-30% savings - 7% of respondents
>30% savings - 7% of respondents

So, what can we learn from this? First, the median actual savings fell somewhere in the 16-20% savings category. The median expected savings was 21-25%. Expected was higher than actual. No news there as returns on most investments are lower than expected. Is the savings enough to justify the efforts? At 20% I would say, yes. Below that it's more questionable.

It is safe to assume the top performing companies using LCCS were above the median. I guest the moral is to make sure you are top performing with regards to sourcing as you need to be in most key parts of your business to succeed.

This survey was taken in the last several weeks, so the savings likely represents experience from 2008. I'll post more interesting information from it in future posts.