“One of the things that’s fun about outsourcing is you get to create new ways of doing business together.”
On Where Outsourcing Is Heading
It’s no secret, but there’s a major shift to outsourcing functions or business processes. What is interesting is how different buyers and sellers of these functions or business processes are going to market. There’s a shift occurring now allowing the virtual corporation model to come forward. We’re finally getting enough technology in the telecommunications network, coupled with advances in applications for this to happen. The telecommunications infrastructure is finally allowing us to fundamentally change the computing platform.
Secondly, there are partnerships forming between the infrastructure companies like Systemhouse, and the subject matter companies like Mellon Bank an expert in cash management. You will see companies starting to search for these partnerships that can allow them to outsource any function and come closer to that pure virtual corporation model where they really only do things that they do best.
The third trend is we are trying to bring the benefits of outsourcing down market to the Fortune 5000, where heretofore it’s been viewed as a Fortune 500 or Fortune 50 strategy.
The fourth trend is you’re going to see much more prepackaging occurring out in the marketplace in advance of actual customer requirements. I think a large part of the marketplace is going to be interested in coming to a single supplier and saying, `I want to reengineer my HR, how quickly can you do it?’ Some segment of the marketplace is waking up to the fact that there’s two approaches you can take. There’s the approach we’ve been taking over the last ten years where we start with a board room business process reengineering engagement, hire one of the big six firms to come in to do a business process reengineering engagement, and then go out and hire a company to build the systems to support those new business processes. But what we find at the end of this 2, 3, or 4-year period is that the project is way over budget, it took longer than we thought, and we’ve not gained any competitive advantage in the marketplace.
I think that people are starting to realize that there’s a second way to do it: I don’t need my business processes reengineered from scratch, so I’ll find a package application and adopt the processes imbedded within it. So rather than have custom engineered processes and completely custom applications to support them, I’ll bend myself a little bit to fit these off-the-shelf processes that are already supported by a package. And oh by the way, the package is already prepartnered with an integrator, a network supplier, and a hardware platform, and I can be to market in 4-6 months with a new application, as opposed to 3 years. And that’s where I gain competitive advantage. Not because it’s custom. Not because it’s unique.
On Developing A Brand For Systemhouse
One of the things we’re learning from MCI and one of the things we’re leveraging is the MCI brand as well as their savvy in marketing. Quite frankly, when the BT deal closes, we will go to market under a global brand we will most likely be under the Concert brand.
On Implications To The Industry
The IT industry is polarizing on two scales: on the one scale, you’re going to have the providers of the commodity-utility like services† IT companies that are best at providing low-cost MIPs. And on the other side of this polarization, you’re going to see companies that want to move more toward, `I want to be in business with you my customer.’ What people want are partnerships where if the company has a good month and needs more support, the partner ramps up, and if it’s a bad month, the partner ramps down. It’s a relationship that has flexibility in pricing and utilization and allows you to move with the ebbs and flows of your partner. Frankly, we are creating this market right now…all of us. There are no pat answers. One of the things that’s fun about outsourcing is you get to create new ways of doing business together.
Lessons from the Outsourcing Primer:
- Understand and be honest with yourself about what you’re really looking for and let that be the differentiator when you go shopping for a partner.
- Don’t let the partner tell you what it is you ought to be making your buying decision on.