* Little insight into costs of service (unless visibility into resource consumption is maintained)

* Additional administrative burdens associated with root cause analysis (if service is not being delivered as promised) and evaluation of service delivery from outcome-based perspective

--Source: Forrester Research

"The measure of success--or outcome--has to be directly related to the success or failure of the underlying services," says Strichman. "It sounds simple, but it can be hard when you start talking about business outcomes. The supplier cannot influence things beyond the supplier's realm of responsibility."

For example, the CFO may want to tie the outsourced application development of a new product to the profitability of that new product, but that may be impossible. The application development provider could design the world's best system two weeks ahead of schedule and a million dollars under budget, but it has little control over other factors--such as marketing, economic conditions, bad management, inept delivery managers, bad press--that affect the profit outcome.