Savings made through outsourcing core services, such as finance, accounting and HR, are considerably lower than previously claimed, according to outsourcing advisory firm TPI.

TPI said its research, which examined outsourcing contracts awarded between 2003 and 2005, revealed cost savings of 15% on average.

This, it said, disproved widespread market claims that outsourcing can reduce costs by more than 60%.

Its research also showed that cost reduction remained the primary motivation in current outsourcing contracts. However, an increasing number of companies are outsourcing in order to improve quality, up from 11% in 2004 to 21% in 2005.

Duncan Aitchison, managing director of TPI, said: "Opinions vary widely about the cost savings to be gained from outsourcing.

"This research proves that the promise of massive operational savings is unrealistic when you take into account the costs of procurement and ongoing contract management."

A spokeswoman for Zurich, which signed major IT outsourcing contracts between 2003 and 2005, said: "With the outsourcings, Zurich wanted first to increase flexibility and productivity - cost reduction was not such a major driver.

"Overall, the cost reduction [for the entire group] for infrastructure was about 20%."