In search of partnership

Modern businesses must constantly improve the value they deliver to customers if they are not to be quickly overtaken by faster moving competitors. But constant improvement is rarely associated with the use of third-party IT service providers.

That is the damning conclusion of a recent survey outsourcing users by AMR Research.

The situation is not entirely the fault of the IT service providers, say AMR analysts Lance Travis and Dana Stiffler. Traditionally, customers of services companies have been as guilty of treating them as purveyors of one-shot palliative solutions, as the suppliers have of having a project-focused view of their market opportunities.

They highlight how management consultants such as Boston Consulting Group or McKinsey, for instance, are generally hired to help create a strategy to solve an immediate problem. But once the strategy is in place, the advisors and their expensive fees are quickly dispensed with.

Similarly, whilst relationships with systems integrators such as Accenture or Capgemini often last longer, they are still typically episodic and project-driven.

As for relationships between customers and outsourcers such as EDS and Computer Sciences Corp or offshore providers like Infosys and Wipro, these are exercises driven by cost-containment that still rarely add significant value to business processes.

This traditional services supplier/customer relationship model is fine as far as it goes, but for many customers, that is no longer far enough, say the analysts.

In AMR's survey of 110 outsourcing users, only 13% said they have received continuous benefits from their service provider. Unsurprisingly, few business users believe that service provider relationships offer significant business value, and IT professionals do not see long-term cost-benefits in them.

The services status quo offers little real benefit for either service providers or their customers, and AMR believes that both sides of the bargain will benefit by adopting a new relationship model that emphasises partnership, and is based on the delivery of ongoing benefits.

Certainly, the research shows that companies that exhibit the most satisfaction with their service provider are those that have achieved a balanced relationship focused on cost-savings, quality, continuous benefits measured in terms of continuous process improvements (and retooled IT skills), and a senior executive level perception of ‘partnership'.

To identify service providers capable of entering such an intimate and responsive relationship with their customers, customers should measure their prospective partners against a value framework that highlights four key attributes: the depth, breadth, cost and value of their services, AMR suggests (see table). Companies that can truly be categorised as ‘next-generation service providers' should be able to excel against all four of these measures, the analysts conclude.


Next-generation service provider business value framework
Attribute Delivers minimal business benefits Delivers exceptional business benefits
Depth Services are focused on IT technology. Provides benefit by improving IT efficiency. Services are focuses on IT and business processes and strategy. Provides benefit by improving company strategy, efficiency and effectiveness.
Breadth Has expertise in one functional silo (eg IT or financial). Provides benefit by optimising the silo. Has expertise across multiple unrelated industries, markets and silos. Provides benefit by optimising within and across silos and by introducing global best practices.
Cost Staffs services with local resources. Reduces costs through economies of scale and scope. Has global sourcing of tightly integrated resources in an on-demand staffing model. Reduces costs through economics of scale and scope, through onshore to offshore transition optimisation and through usage optimisation.
Value Is able to meet service levels and solve tactical problems. Provides benefit by reacting to and solving existing problems. Pro-actively and continuously delivers process and strategic improvements. Provides benefit by solving existing problems, but more importantly by driving its customers to new levels of competitiveness.
Source: AMR Research

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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