Outsourcing 2.0
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Huge, enterprise-wide IT outsourcing deals are losing ground as businesses look for greater control and value from smaller, more tactical IT service deployments.
Following the ignominious collapse of several major outsourcing deals, IT services providers and customers alike have had to revise their approach to the entire outsourcing business. Now, what was once a “fairly blunt and unsophisticated” tool, says Richard Warley, managing director at IT outsource provider, Savvis, is giving way to an altogether more complex model.
Chief among the elements of this changing model is the growing empowerment of the customer. As Derek Ward, executive VP for UK markets from Atos Origin explains, outsourcers have always subcontracted, but now the onus for man-aging various tiers of contracts and subcontracts is, in many cases, shifting to customers. This shift in control affords clients greater flexibility in terms of both what they outsource and how they outsource it.
Many organisations are now determined to build-in manoeuv-rability to outsourcing contracts. This often means demanding short-term deals, sometimes no more than a year long, to prevent being locked in to just one provider. While today the average number of IT service providers used by European companies number around four, this is likely to rise as the breadth of choice of delivery model becomes ever important to customers.
Where global delivery is concerned, organisations are also looking for more choice. Already, some of the Indian IT service behemoths, such as Satyam and Tata Consultancy Services, are investing in locations as diverse as Hungary and Brazil in order to maintain low costs and satisfy customers’ more diverse cultural and linguistic requirements.
The creation of a global outsourcing footprint signals the growing maturity of the outsourcing market – a trend that is also evidenced by the growth of standardisation. Although at present standardised business processes account for less than 5% of the total business process outsourcing (BPO) market, turning business processes into distinct services, provided on a pay-as-you-go utility basis, promises to cut costs for companies even further, says Warley. This, he adds, will substantially improve the efficiency of the outsourcing model going forward.
