Future Sourcing | Article

man looking forwardAs part of Professional Services at Compaq Computer Corporation, eBusiness Management Services (eBMS) is an Internet provider company. The company has managed the Microsoft network, including connecting more than 1,600 servers into its enormous server farm, for four years.

“Increasingly, companies decide to move from managing computer-related operations internally into a distributed client-server world primarily driven by the Internet. They turn to us,” says Tim Leisman, vice president and general manager of eBMS, “because they don’t have the expertise or desire to acquire it. They ask us to help them grow by managing technology and applying it to their business requirements.” Through its Future Sourcing brand, eBMS becomes a long-term strategic partner, helping its clients improve their businesses through proactive behavior around technology and an understanding of what the future holds. Leisman notes four major changes in outsourcing for the year 2000.

Today’s Trends–Tomorrow’s Standards

The first trend is a departure from traditional outsourcing of existing computer assets, people, and technology. Compaq notes that buyers are now acting from a perspective of needing to focus on their future requirements and putting new Internet exchanges and knowledge management systems into place.

As a second trend, the increasing presence and strategic consequence of telecom players in outsourcing is already happening. “I think there will be some disrupters in the established line of players. The real question is whether they will be acquired by the big players,” Leisman says.

The smaller telecoms are using ASPs models. He explains that larger telecoms are seeking alliances and joint ventures with IT partners in order to address the convergence issue. Leisman says this nontraditional partnering is driven by the Internet, requiring all content to be organized more efficiently for the customer. “The telecoms know they are very well positioned to take advantage of the Internet explosion,” Leisman says. “I believe they will either create strong partnerships with IT providers, or they will acquire them. Five years ago, you never would have talked about telecoms as competitors in an outsourcing perspective, but there is no question that they are now going to be out there. And they have huge assets if they want to do this seriously,” he explains.

A third trend is an emergence of a whole new breed of service providers. “These dot-coms are going to influence services in a significant way,” Leisman says. It goes hand-in-hand with the fourth trend, which is the Internet’s elimination of a requirement to be onsite at a corporation in order to provide information assets. “All you need is a web browser with the right security, and that data and infrastructure can sit anywhere in the world,” says Leisman.

Areas of Growth

In addition to e-commerce and support, eBMS is focusing on provisioning content management within web-based operations. “We all know this whole new dimension of knowledge management is very strategic to companies right now,” explains Leisman. “They have to learn faster and take advantage of their key asset–their intellectual property?more efficiently and effectively.”

“Because of the needs to become multinational, more efficient, and deal with issues of scale, the business-to-business Internet exchanges are going to be one of the biggest plays,” says Leisman. “I think that there is a host of new business models and significant transactions happening in exchange opportunities today. Examples might be exchanging oil and gas; funds transfers among banks; or consolidating purchasing among hospitals. Those are certainly going to be very big.”

eBMS is also focusing on customer relationship management and web-based customer care solutions for its clients. These are hot areas, according to Leisman, for “they must be thought of in an Internet-centered paradigm, different from the way we used to do those things.”

Leisman highlights change management as another area of growth. “There is an extraordinary amount of work just to get the infrastructure of companies in a position where they can take full advantage of these new and emerging technologies and IT business models,” he says. Considering the amount of merger/acquisition activity around the world, the infrastructure issues become even more challenging.

One of the core competencies of eBMS is change management. When two companies with disparate cultures and networks merge, the larger issues often are not the technology, Leisman explains. In bringing the whole infrastructure together, the real issues are people and management.

Yesterday’s Discussions — Tomorrow’s Primary Strategy

The nature of the relationship between the outsourcer and its client centered in the late1990s around discussions of improving relationships by aligning interests through co-investment and sharing of risks and rewards. Leisman says that eBMS now finds it almost impossible to talk with a potential customer about a significant outsourcing agreement that is limited to supporting their internal IT requirements.

“CIOs are now viewed as someone who is accountable to help the business understand how to use IT as a competitive advantage,” explains Leisman. “In almost every deal we now get involved with, they want our technical knowledge of how to achieve a competitive advantage through the assets we manage on their behalf.” Taking partnering steps beyond running a company’s IT environment includes understanding its business models going forward and how the outsourcer can help it go to market. This shift from tactical outsourcing agreements to strategic outsourcing agreement is a larger part of the dynamics of outsourcing in 2000.

Leisman also sees another change in the structure of outsourcing relationships, due to Internet-driven opportunities. He believes we will see an increase in joint ventures to form new companies with brand and credibility. It makes sense, he points out, to form a third party venture for a pure Internet play. It is difficult these days, he says, to attract people to IT services unless they can be partners of a potential IPO or some kind of capital market play. A new entity will draw talented people. It will also create an entirely new culture apart from the bureaucracy and decision-making processes of the mother companies.


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