The Next Generation of Outsourcing

MikeAccording to, “The New Age of Outsourcing,” there’s a new generation of outsourcing deals upon us, as IT organizations seek more from their service providers in order to accommodate increasing demands. These new outsourcing trends all have one thing in common: the desire to take a risk and try something new.

The first trend indicates that buyers of IT services are on the lookout for managed services over staff augmentation. This arrangement allows for increased flexibility, but it also requires a higher degree of trust between provider and buyer, and the buyer must spend more time outlining the scope and desired outcomes of the deal.

The second trend is that outsourcing customers are becoming more focused on business results and opting for outcome-based pricing. Of course, this requires that the buyer and seller have a clear understanding of the outcomes prior to starting work. We refer to this as vested outsourcing, which calls for an agreement based on desire outcomes, explicitly sating the results that will base the outsourcing contract.

The third trend speaks to a change in the traditional RFP. Instead of describing exactly what they want and how it should be done, buyers are now describing their problem and asking suppliers to present solutions. This speeds up the RFP process and narrows the field of competitors, but it also requires strong engagement and trust between both parties.

The fourth trend is one of the riskier ones: commercialization of outsourcing, wherein a provider develops a system for a client, the client buys the rights to that system, and then it can be marketed to others, with both parties sharing the profits. This is an entrepreneurial approach, which may not be appealing to all providers/clients, as it may not result in any industry interest.

The fifth trend relates to service integration, which is largely being brought in-house and allows clients to better manage providers.

The final trend is a reassessment of outsourcing relationships. Many clients have several outsourcing relationships, and taking a routine, holistic look at whether or not the relationships are functioning appropriately can lead to changes or a reinforced desire to continue on the same course.

These changes are indicative of a general trend in IT to bring greater value to the business – starting, in this case, by getting greater value out of outsourcing. While the trends outlined above are largely risky undertakings compared to traditional outsourcing relationships, they may prove to bring more value over time, including more open communication between client and provider.

Read “The New Age of Outsourcing,” from CIO Insight.

 

Mike Harris
DCG President

Written by Michael D. Harris at 05:00

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