Outsourcing customers put trust high on their list of criteria -- 85% rank it highly important, the second most-often mentioned trait -- but at the start of most deals, there's inevitably an us-versus-them attitude on both sides. It's up to senior management to spend time dispelling that through monthly or quarterly meetings to discuss performance, problems, or strategy. The American Automobile Association is very concerned about outages, so its internal staff understands how critical it is to quickly get things running again. "With outsourcers, we have to create that sense of urgency," CIO Satish Mahajan says.

But Dan Rosman says the time he spends managing outsourcing is going down. The IT director for Jelly Belly Candy Co., a privately held company with more than $100 million in annual revenue, has outsourced its E-commerce applications to Accenture for nearly a year, and now he reviews Accenture reports and gets involved only when problems arise.

After years of outsourcing experience, Jim Saber, CIO of bank holding company Providian Financial Corp., says that making internal executives accountable is paramount. When outsourcing deals fail, he says, it's almost always because the CIO shifts responsibility to the outsourcing company. "Outsourcers must be one component of your resource pool," Saber says.

The No. 1 reason companies turn to outsourcers is to save money -- 64% say that's the main goal of their outsourcing contracts -- yet many aren't happy with the results they're getting. Respondents ranked Sprint No. 1 for cost/value, followed by HP and Computer Sciences Corp. At the bottom are IBM and Accenture. Companies generally report lowered costs with outsourcing, but at the outset, many overestimate the savings and underestimate the costs. Thirty percent of respondents say their cost savings fell short of expectations, and 38% complain of unexpected add-on costs after their contracts began.

But that suggests seven out of 10 are pleased with their costs savings, as Overhead Door Corp. is. The specialty door maker uses Sprint to manage 95% of its data-center infrastructure, which should shave $1.2 million off Overhead Door's costs over the three-year contract. Farmers Insurance Group saves about half of its IT labor costs by outsourcing IT maintenance tasks to Wipro Technologies, an offshore firm (see story, "Team Building: Managers' First Job Is Building Trust"). Most large U.S. outsourcers claim that on average, they reduce customers' IT costs by 20% to 30%.

Outsourcing is time-consuming, 7-Eleven's CIO Morrow says.

The savings can be tough to measure. 7-Eleven has been outsourcing so long it's hard to quantify the cost of running its own mainframe and midrange data centers and network management. But CIO Morrow puts a premium on being able to leverage the outsourcer's buying power and adopt new platforms and technologies more quickly than if operations were in-house. "You can follow the technology curve much better with outsourcing," he says. In this sense, Morrow is in the minority -- only one in five survey respondents considers innovation or cutting-edge technology a main goal in an out- sourcing relationship. Good thing, because it isn't outsourcers' strong suit; they got their second-lowest average scores for innovation, trailing only strategic advice.

A frequent complaint is that vendors charge extra for labor, software licenses, or other areas after a contract has begun. "We haven't figured out a way to manage it," says Mike McVeigh, senior systems engineer for the Federal Aviation Administration, which uses a variety of vendors, including IBM and Tivoli, Lockheed Martin, Raytheon, and WorldCom. "The vendor is trying to buy low and then add after the contract begins." The FAA tries to keep add-on costs under 10%, but there have been large projects for which those costs were doubled.

One solution: Managers need to build extras into the budget, because they're a given. Continental prepares for extras by setting a price up front for everything and paying as it goes each month. For instance, the contract outlines set prices for each processor or for each new piece of hardware at an airport.

One reason companies don't always save what they hoped to, especially with their first outsourcing deal, is because they don't have the correct internal staff: They don't lay off enough people to get savings, or they lay off too many. "They almost never get it right," says Douglas Frederick, executive VP for EDS. Sometimes the staff that remains is so small that employees don't have the resources to optimize the work. It often takes up to a year to balance it out. Companies are better at determining staff levels the second or third time they outsource, Frederick adds.