The information technology (IT) outsourcing industry was launched by an explosion of rapidly changing technology and companies’ needs to access benefits of that technology at the lowest possible costs. The bottom line was cost containment. Today, that line is a bit blurred. Although cost containment continues to be a major issue, many companies have other goals as their primary reasons to outsource.
Over the past three years, strategic outsourcing has become an increasingly familiar practice — and by all accounts, it will be even more prevalent in the near future. The worldwide market for outsourcing services is expected to double in the next five years — and, according to a recent survey, a majority of executives will consider outsourcing nearly every non-core business process by the year 2010.
Today, enterprises of all sizes want to expand their reach to new customers, to contain or reduce their costs, or to bring new products and services to market more quickly. Increasingly, they are looking to information technology (IT) to help accomplish all these goals.
There’s a high rate of dissatisfaction among customers with IT outsourcing agreements, according to recent surveys by Deloitte & Touche, Coopers & Lybrand, and others. However, that dissatisfaction appears to signal the industry’s growing pains rather than its demise. The outsourcing market has continued to grow, enjoying a 15 percent to 20 percent annual growth rate for several years.
Are you getting ready to negotiate an outsourcing contract? If so, place flexibility high on the list of negotiation goals. Many customers involved in long-term outsourcing contracts in the past have learned the hard way that the restrictive and static nature of normal contract terms can tie their hands in the rapidly changing outsourced IT environment.
Long-term Information Technology (IT) relationships have always been fraught with challenges. Today, long term relationships patterned after those of the past don’t have a prayer for success. Why? Because the static nature of the agreements dooms them to failure.
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