“More people are turning to technological outsourcing at an incredibly rapid rate,” says Rick Roscitt, president and CEO of AT&T Solutions. He notes companies turning to outsourcing for solutions to their financial, skilled workers, and global reach problems. “I know there is a lot of nervousness and this is an industry where everybody is always fretting about whether it peaks, but I think that the industry will enlarge greatly in 2000.”
How to Win the Game
Roscitt firmly believes that the most competitive advantage a company can obtain is achieved through presence on the Internet. He acknowledges that analysts who believe e-tailers are just retailers with higher cost structures (therefore doomed to failure) have a point, mathematically. “But I think this is just an early inning of a very long baseball game,” says Roscitt. “I think it is inevitable that everybody is going to move to an e-business format.”
He believes that movement will happen, though, in the form of integration between e-business models and brick-and-mortar business models. “In that environment,” Roscitt says, “it will be a combination of classic business skills and e-business skills that win. I am not a big believer that there will be no more branch banks, no more personalized service, and that everything will be web-based. The early e-commerce firms are starting to adopt some of the formats of the brick-and-mortar companies. The trick of the future is to culturally and physically bond the e-business and the brick-and-mortar models to getthe best of both worlds.”
Roscitt subscribes to the continuous process flow of the chemicals industry as a model of future business. Such a chemical plant cannot be shut down and must run 24 hours, seven days a week. “If you shut it off, really bad stuff happens–the pipes corrode and the place could literally blow up. I think businesses are going to start to run that way–24/7 in a continuous process flow,” comments Roscitt. “Work will be done in an automated, web-like handoff from one functional group to the other, with the customers and suppliers participating along the way. Those who figure out the design of that new process and then automate it will be winners the next morning.”
The Game’s Competitors
While outsourcing through the 1990s was principally a North American phenomena, AT&T Solutions sees the industry rapidly becoming more global. “Now, when we do outsourcing for a global North-American-based company, we perform services all over the world,” Roscitt says. European, Asian and Latin American countries are outsourcing more, as global competition forces them to catch up on their IT platforms.
The current demand for investment and skilled workers in IT will drive outsourcing, Roscitt believes. “I think the growth in this field will attract lots of new players in 2000. Certainly the biggest players will continue to get bigger, but I think others–especially telecos and niche players–will jump in,” he says. Referring to the growth theory that only the paranoid survive, Roscitt recognizes that everybody is a competitor. The solution to that dilemma, he says, is “to increase your capability and be as good as you can possibly be every single day.”
Alliances are the best bet for outsourcing strategies in 2000, Roscitt says. Although he recognizes that some companies will test the joint venture waters this year, he believes joint ventures “require too much work to make them work.” He cites the Technology One Alliance (among IBM Global Services, AT&T Solutions, and Bank One) as the best example of an alliance.
“We don’t have the headaches to manage cash flows that joint ventures have; we each manage our own financials. But we have a shared obligation to each other,” Roscitt explains. The alliance among the three partners includes a governance model, a long-term strategy, regular board meetings, and intervention processes. They participate on a win-win-win basis, none of them looking to get as much as possible for as little as possible. “It is as if we were managing a virtual corporation together,” he says. “I think that model–if you have the investment and energy to participate with each other as much as we participate with each other–is the model that has the best chance of succeeding.”
Roscitt differentiates outsourcing buyers into two categories. There are those who simply want to reduce costs. They are neutral as to which supplier accomplishes that, and they are indifferent as to whether there is a strong relationship. “The other segment of the market, like Bank One,” he says, “has a more enlightened point of view. It says: ‘We’re
never going to be better than the suppliers who support us, so we are going to make them partners, and in our alliance, we will care almost as much about their ultimate success as we do about our own.'” That enlightened approach, he believes, will make the difference in successful outsourcing in 2000.
Next Up to Bat
Government outsourcing in the United States is poised to be a growth area. “If you look at every corporation on the face of the earth, it is more efficient today than it was a year ago. They have adopted technology and, along the way–sometimes painfully and sometimes well done–shed a lot of people. I am part of an enterprise that has shed an enormous amount of people–20,000 in one year,” says Roscitt. He notes, though, that the federal government is about the same size it was ten years ago. While there is talk on the federal level about becoming more efficient, Roscitt notes the state and local levels have been forced into a different scenario. Because funding from Washington is down, we are starting to see those levels of government actually tackle the issues of running their organizations more professionally and effectively.