What's more, an outsourcing deal is a hard sell if it costs more than an in-house effort, asserts Primedia's Robinson. "But what are you going to do, go for the lowest price and ruin your business?" Pryor agrees, contending that if that were the case, the lowest price bidder would always win.

Successful outsourcing is most dependent on selecting the right vendor, say 58% of the buyers. The ongoing management of relationships is also highly coveted, with 45% considering that most important. In addition, 38% insist a properly structured contract leads to a successful deal. On average, large companies are spending $37 million on outsourcing projects already in the works, with 15% of them shelling out over $100 million per project. A thrifty 15% are spending between $1 million and $5 million on existing products. The lavish spenders all fall into the "largest" company category.

The average spend for projects still on the drawing board is about the same as those already launched, $38 million, with 13% expected to top the $100 million mark.

Like last year, the most popular function to outsource was information technology, which topped the charts with 64% of the vote. Again, like the 2002 survey, administrative duties, at 35%, came in second, followed by human resources, and distribution and logistics, which pulled a healthy 24% and 22% respectively.

Of those still considering outsourcing, IT and administration remain the most popular function to send out. Logistics, call center, and finance funtions round out the top five.

As for timing, most large companies are just starting to evaluate outsourcing projects. More than half (56%) are in the assessment stage, meaning management is still defining an outsourcing strategy or evaluating which function to outsource. Another 25% are managing the post-contract relationships, or at least are making the necessary transitions to outsourcing. The remaining 19% are either selecting a vendor or are in the request-for-proposal stage.

Careful assessment seems to be the hallmark of large companies. No wonder, these titans are usually signing multi-year contracts and spending in excess of $100 million.

American Express Co., for example, spent two years vetting its $4-billion, seven-year IT infrastructure pact before signing with IBM. The company's careful planning paid off.

When Amex management started the process in 2000, the economy was still soaring, and executives were intent on removing impediments to business growth. They determined there was no competitive advantage to holding on to technology operations, and accordingly, began talks with IBM to outsource Amex's IT infrastructure. Once out from under the infrastructure's cost and operational burden management gained the flexibility to capitalize on the robust economic environment, says company spokesman Anthony Mitchell.

The plan turned out to be prescient. Soon after Amex inked the deal in February 2002, the sputtering economy took a nose dive. As Mitchell tells it, the more nimble Amex was able to shift gears to handle the downturn.

Although Amex's grand plan was never about cost, Mitchell points out that "price and cost savings were absolutely an important consideration."

While cost reduction beat out any other reason for outsourcing, more than half of the Index respondents (51%) placed "improving company focus" in second, with another 39% claiming that "attaining world-class capabilities" ranked third. "Freeing up resources for other purposes," came in a close fourth, capturing 37% of the vote.