Supply and Demand | Article

two at computer from aboveThe biggest impact on outsourcing this year will be the scarcity of technical skills. So says Bob Evans, vice president and general manager, outsourcing, at Unisys. “Every resource within organizations has been focused on old technology while working out Y2k compliance difficulties. Therefore,” he says, “not a lot of people have upgraded their skills.” That, coupled with the fact that there is also a shortage in talented IT workers, leaves organizations in dire straits to accomplish their strategic goals for competitive advantage.

“Companies are going to want to web-enable everything they possibly can,” says Evans. “But their people don’t have the skills, and there is no way to have them develop the skills fast enough to meet their needs. The web is going to drive everything quicker.” The solution is outsourcing, and it promises to be a tremendous year for the industry.

Opportunities Abound

Evans believes the primary reason for the shortage of available workers for the corporate world is that skilled, talented individuals want to work for IT outsourcers. “A lot of people are moving from traditional corporations into IT companies because their opportunities are greater,” he says. “They are going to get top new technology, have the opportunity to work on varied projects, and have greater opportunities for growth. As employees in an IT company, they will be valued and appreciated for the skills that they have.” He adds, “We have to invest in our people in order to have the skill sets to go to market. We have to invest in our people to ensure that we can meet future needs of the marketplace as well as today’s needs.”

Opportunities abound for outsourcing in the areas of desktops and networks. His opinion is that no company currently manages desktops well, and that function will increasingly be outsourced. In the area of networks, the lack of skilled people is the problem again, and he believes we will see the start of an explosion in network services in 2000 that will continue to grow dramatically.

Thirst for Value

Many companies have already driven out a lot of their costs, due to outsourcing in the 1990s; and some are now quite efficient, Evans says. “But they are not IT companies. So I think that they will resort to outsourcing to offload those things that are not core because everything competitive is now driven by IT.” Although outsourcing in these instances may, in fact, cost more than performing a function in-house, it is driven by a desire for diverse services. “A lot of this has to do with the people shortage,” he says, “but I think the economics will be such that we will stop seeing as many commodity deals and start seeing value propositions that allow a company to offload not just today’s stuff,† but their future stuff as well.”

That will have the effect of forcing outsourcing consultancies to look at the value of relationships and assist their clients in developing and executing a strategy. “Those capable of doing that will do well,” he says. “But the consultancies that try to drive the price down to a commodity pricing–ripping the value out of the deal–won’t do well in this new marketplace. It will be true consultancies that are looking for the best solutions and how to wrap them together for their customers that will do well.”

Evans says he thinks there will be some examples of shared service centers in the market this year but that, although they are intriguing, they are also fraught with problems rather than value. “This is really a management distraction,” he comments. “Companies should be focusing on their core business. They should have pure contracted IT organizations focused on their IT and pure BPO organizations focused on their business processes, as opposed to trying to share those services.”

Going to Market

In order to protect market share, more organizations will enter the Internet marketplace. That, in turn, will drive companies to ASPs where they can outsource services that allow them to go to market quickly. Evans believes we will see a lot more ASPs in 2000 and that the virtual corporation will become prevalent. He also believes companies will focus on business process outsourcing (BPO) greater than in the past, in efforts to streamline their companies.†

The Dawn of Possibilities

Evans predicts an increase in public sector outsourcing this year; however, because the government moves so slowly, significant results on the federal level may not show up until 2001 for deals closed in 2000. On state and local levels, he predicts possibly as many as ten states and a lot of large counties and cities headed for outsourcing.

“I think that is going to be a very robust marketplace. And I think that those who have strong roots in the public sector environment will have an opportunity to do more of those projects.” Unisys has been in that marketplace for a long time and enjoys a good reputation. In government outsourcing, that is an important leverage.

Call for Connections

The reality is that there is not one outsourcer today that can be all things to all people. “Because of that,” Evans says, “we will see more alliances, some acquisitions, and general consolidation of the industry. I think we’ll also see in certain industries that a company which thinks it has a very robust offering will spin that off as a new company, holding 51% of the shares, and generating capital for itself from the new business arm.” The demand is great, and there are boundless opportunities this year for the outsourcing industry.

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