But deals signed just to save money often disappoint, research claims

The first quarter of 2006 was the strongest ever for outsourcing contracts, new research shows.

The report from sourcing advisory firm TPI says 83 contracts have been signed so far this year, with a total value of €18bn (£12bn), compared to 76 deals at €12bn (£8bn) in the same period of 2005.

TPI's managing director Duncan Aitchison says the strong quarter is the result of rise in the number of contracts being restructured.

'However, even when even when we exclude restructurings, the number of contracts signed so far this year is still a first quarter record,' he said.

The report also claims that financial savings available from outsourcing have been greatly over-estimated.

When the costs of procurement and ongoing contract management are taken into account, client expectations are not usually met, Aitchison says.

'In our experience, outsourcing arrangements which focus solely on delivering huge savings often fail to meet client expectations. 15 per cent is not only a realistic saving, but also a significant one,' he said.