The move toward selective outsourcing has created a marketplace where fewer big outsourcing deals will be transacted and more niche vendors will team together to deliver the services they do best to specific customers. That’s one of the major trends seen by Wendell Jones, vice president, Operations Management Services, Digital Equipment Corporation (Compaq).
“We’re going to see more contracts that are structured on the basis of finding the best of breed in particular areas,” he said. “What that leads to is that providers will team to bring together the services that they do best and bid on the work on that basis, rather than trying to claim that they are the best at all things.”
Jones said that trend has been growing over the past couple of years and that Digital has been active in vendor partnerships. Such arrangements do raise the question of who’s in charge.
“Some companies prefer to manage all the vendors themselves,” he said, “but there’s usually a prime and the others are subs in a relationship with the customer.”
These teaming arrangements are not the only change Jones sees in outsourcing relationships.
“Clients and vendors are a lot smarter about how to do this process right than they were four or five years ago,” he said. “They have begun to recognize the importance of crafting a good solid relationship, so that together they can achieve benefits they could not have done on their own.”
The crafting of those relationships begins with structuring a contract that identifies the measurements to be used for continuous improvement and the achievement of business values.
“Companies are going to sponsor and promote best practices and outsourcing relationship management,” said Jones. “The good news is that more companies are recognizing the immense importance of that and that activities are beginning to emerge to promote them. Companies are working hard to create excellent win-win situations, related to the value of the business and now just technical expertise.”
An Eye to the Future
One of Digital’s major roles in the industry is providing what the company labels “future sourcing,” services that represent what Digital sees as the future of the business. “Digital focuses on the infrastructure that supports the client server,” said Jones. “So as folks move to NT and related applications, SAP, the internet or intranet, we would take over maintaining the infrastructure so that it has the reliability and scalability that companies are going to need.”
That emphasis, he said, removes Digital from many arenas of competition and positions the company to partner with more consulting companies than many other vendors do. “For example, an Andersen or an Ernst and Young might come to us because we have clearly defined that their business is not our business,” he said, “and that we can have a hand-in-glove kind of relationship.”
Like many others in the industry, Jones predicts an accelerated growth of outsourcing in Europe. “European industry is just now coming around to where American industry was seven to 10 years ago,” he said. “They’re just beginning to realize that they have to restructure.† They have to come up with better ways of doing what they do in order to become competitive in the world marketplace.”
Although growth in Europe seems clearcut, the future of outsourcing in other international marketplaces is a bit more hazy. In Asia, for example, Jones said the effects of the financial crisis make the future more difficult to predict.
Who’s in Charge?
On a smaller scale, that inability to predict the future is at the center of most customers concerns, according to Jones. He said customers worry about getting value from their investment, having an outsourcer that can adapt to business changes, and losing control over staffing issues. The concern that looms the largest in most customers’ minds is having a vendor that is “nimble enough to adapt as we have.”
Jones, who spent a number of years on the customer side, said experience showed the concerns over staffing issues were unfounded. He, in fact, gained more control over what he considered the most important factor, the business value of the technology. “But the basic mindset is, if I can’t hire and fire the person directly, I’ve lost control,” he said. “You really can influence that too. Your provider wants very much to have good things said about them. They have a much stronger motivation for that than an internal IT organization.”