Companies have been warned against having unrealistic expectations of what an IT outsourcing deal could provide for their firm.

According to analysis group Compass, as many as 65 per cent of outsourcing deals come apart before they reach the full contract length.

Explaining this phenomenon, the firm suggested that the bidding process often leads to suppliers bidding low to simply secure contracts - which are then picked up by buyers.

However, the lack of initial investment as buyers focus on saving money up front translates to lower service and a failing of the outsourcing deal in later years.

So rather than generating savings, as is the aim of most outsourcing agreements, the high level of failure can result in significant costs as the contracts flounder and have to be unwound or renegotiated.

But it is not solely the practice of buyers looking for cheap deals which is causing problems, Compass claimed.

The analyst group's research suggests that outsourcing firms deliberately pitch initial costs lower to show their clients a saving of an average 18 per cent below their previous outgoings so that the contract starts off successfully.