Companies frequently turn to outsourcers to harness the tremendous power of spiraling IT technology and shape it into a tool for standardizing their information functions across business lines and geographic borders. Unfortunately, all too often they then tie the outsourcers’ hands by failing to establish standardization as a top priority within their enterprise.
International Outsourcing: Executives at Grupo Nacional Provincial (GNP) know all about the value of research. Statistics and other research information are part of their day-to-day business as the largest insurance company in Mexico. Therefore, when the company was considering outsourcing part of their Information Technology (IT) functions, the first step logically was research.
All things are not equal. Never has that truth been more evident than in the challenges facing multinational corporations’ efforts to implement seamless network communication around the globe. The goal of providing and maintaining full capabilities to even the most remote production facility frequently slams into the reality of infrastructure inconsistencies across the company’s global footprint. At that point, many companies turn to outsourcers.
A recent Coopers and Lybrand survey of 428 high-growth companies revealed some disquieting news. Over half of the companies surveyed were dissatisfied with the overall results of their outsourcing agreements. Things, they said, just didn’t get better.
Specialization, once primarily the domain of physicians and attorneys, is spilling over into other fields in the ’90s. CPAs specialize. Writers specialize–even some dog groomers specialize in certain breeds. IT is no exception.
If you’re contemplating an IT outsourcing relationship, forget about the 10-year, fixed-price arrangements of the past. Those cash cow deals have been butchered by the pace of technological change.
Ah, the honeymoon stage of a business relationship, that early stage when everyone is enthusiastic, when you envision benefits that will continue to multiply, when you celebrate each small increment of success. You’re focused on the objectives of the agreement. You talk frequently. You nip and tuck and shape exactly the relationship you know you need.
If it’s not broken, don’t fix it. Hyatt Hotel Corporation put a new spin on that old adage in 1996 by ‘fixing’ the company’s well-functioning IT organization before it broke. The result is an outsourcing agreement that continues to deliver Hyatt’s high standards of customer service while providing the resources to plan for the future.
Culture shock. That’s not something most would expect conservative icon Rolls Royce to embrace, but that’s exactly what the company sought in its outsourcing relationship with EDS.
You’re in the final stages of your outsourcing agreement. You and your outsourcer have worked out pricing, processing, staffing. Then up pops the devil in the form of third-party software licenses.
Outsourcers that have the infrastructure and more importantly the expertise within a given process will be able to capitalize on that opportunity.
We continue to see the refinement of the evolving nature of the deals at the industry’s high end, which reveal a high degree of creativity and innovation in some cases driven in large part by IT executives.
If you look back five years ago, most people would think of the value of outsourcing simply in economic terms as a way of reducing costs and restructuring the balance sheet. I think the focus now is far more on is there a better way to leverage technology in a very competitive environment where we have pressure to move quickly.
A fundamental shift is taking place in the way outsourcing decisions are being determined today. Corporations have realized that they cannot abdicate responsibility for the use and impact of information technology within their organization.
The most dramatic change is the willingness to outsource core activities. The conventional wisdom has always been to outsource non-core activities, but most of the big wins in 1996 were core activities.
There are five lines of business that will define EDS today and going forward into the next five years: we will continue to play a major role in the systems technology management arena that’s outsourcing, systems integration, development and maintenance, we’re also building a robust business process management business that’s supply source, teleservices, data mining and warehousing, imaging, environmental and safety, and logistics, consulting, cosourcing is a distinct line of business, and electronic markets card processing, electronic funds transfer, EDI, and internet/ intranet in some ways actually being a direct participant as opposed to a supplier.
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