One of the most telling changes in future outsourcing will be the reshaping of relationships as companies continue to move away from cost reduction as the single key driver.† That’s what Chuck Jarrow, director of marketing for integrated services, Computer Sciences Corp. (CSC), sees on the horizon.
“Companies that are outsourcing the full range of their IT operations are truly realizing the importance of gaining a partner in their company,” he said. “In previous years, these words were often spoken, but the service provider was subsequently treated more as a vendor than a partner. Today, the partnership is more than just a fancy phrase.”
This move, said Jarrow, is driven by the fact that more companies are recognizing the benefits of outsourcing as a business strategy. With that recognition has come less emphasis on cost reduction and more on such benefits as flexibility and speed in delivering business solutions, access to new technologies and skills, ongoing productivity improvement and enhanced training and development for IT employees.
He points to relationships with J.P. Morgan and CNA as examples of the way CSC has been consulted as part of a team to facilitate acquisitions and divestures.
“We’ve been part of their planning process and how they can best facilitate these transactions from the IT standpoint,” said Jarrow. “They didn’t come to us and say, here’s what we need to know, now here’s what you need to do. They said sit down with us and tell us from an IT standpoint what’s the best way to handle acquiring the resources and IT structure of this company or how you can help us when we split this particular division off and sell it.”
Jarrow said the desire to form such partnership relationships has to be mutual.
“You want to be a partner as a service provider, but they have to accept you as such,” he said. “Now they’re not only tending to accept us and other vendors as such, it’s becoming more prevalent in the nature of what they’re looking for in the RFP. The question now is no longer what the data center looks like but whether the relationship is a comfortable fit from a cultural standpoint and understanding of the business.”
The People Problem
This migration toward true partnership carries with it some new challenges. The greatest of these, according to Jarrow, is finding the number of qualified people needed to keep up with the growth opportunities offered by the marketplace.
“One of the nice things about IT outsourcing is that you tend to acquire a large number of people along with the engagement,” he said. “But the top level management talent that you need — the specialty talent that the company is looking for from you that they didn’t have in their in-house people — this is our differentiator. We work very hard to bring these people into the company, and it’s a challenge. Everyone’s tight on finding these people these days.”
Planning for Change
The inclusion of business processes in outsourcing relationships creates yet another challenge, the need for flexibility.
“Everybody knows these are long-term deals,” said Jarrow. “At the time you sit down and design the contract and set of services, about all you know is that it’s not going to look like it does now in five years. So a major concern is the whole contract flexibility piece — the ability to get the new services, new technologies, the incremental growth or cutbacks as may be needed as the business changes.”
That need for flexibility has created an environment where contract renegotiation and modifications are being considered part of the normal business cycle.
“The key thing up front is to give yourself the flexibility to do those contract modifications without having them become a major disruption to the arrangement,” said Jarrow.
This recognition that change will occur also could help maintain smoothly operating partnerships in another way, according to Jarrow. He noted that outsourcing arrangements usually work well initially because the people from both sides have gotten to know and respect one another through the process leading up to the actual contract signing. Problems can begin to occur as the players start to change.
“As a company moves new people into liaison positions, I’d strongly encourage them to ensure that these people are given the same insights as their predecessors into the objectives behind the decision to outsource, the contract terms, etc.,” he said. “Sometimes these people have personal agendas for the outsourcing agreement that don’t match the original objectives as reflected in the contract, and this causes confusion.”
What Lies Ahead?
Overall, Jarrow sees a bright future for outsourcing, with the practice maintaining its status as a significant business strategy in areas where it’s already accepted and gaining significant momentum in other areas around the world. He looks forward to that international growth.
“We like to differentiate ourselves by saying we’re global, not just a company that operates internationally,” he said. “We’ve taken a lot of steps in the last six months and will continue over the next 90 days. Then we’ll be pretty much where we want in terms of globally integrating every aspect of the outsourcing part of our business.”