Global corporations are facing competitive pressures and as result are outsourcing products or services to improve profitability, reduce delivery schedules, increase product features, and increase value to their shareholders. However hidden or unexpected costs can come with these benefits that erode the expected profits and outweigh the cost savings. This includes unintended consequences that arise from employee layoffs and knowledge loss. This can result in negative perceptions on the value of outsourcing within the firm. This paper will report on a study of an outsourced development project at a Fortune 500 company that examined the drivers that impede accurate cost estimates used to assess the viability of outsourcing R&D activities. A result of the case study was that while there was hidden costs uncovered, significant misperceptions within the firm initially eroded the value of the outsourced activities.
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