Long-term Information Technology (IT) relationships have always been fraught with challenges. Today, long term relationships patterned after those of the past don’t have a prayer for success. Why? Because the static nature of the agreements dooms them to failure.
International outsourcing embraces several common factors: the creation of value, the introduction of concepts, the portability of technology. Then there are the uncommon: language and culture. We’ve heard it over and over again. The supplier community’s biggest concern is getting and retaining qualified people, said Steven Leakey, EDS’ former director of marketing and business development for Asia/Pacific. But it’s an even bigger and more complex concern for the international outsourcing marketplace.
Tall oaks from little acorns grow. That old Latin saying applies to the staggering growth taking place in international Information Technology (IT) outsourcing. The growth trends predicted over the next few years in the US and around the world are rooted in a strong and established corporate practice of outsourcing. As this growth continues, COMPASS sees a worldwide need for more effective, corporate outsourcing strategies.
The European Theater is primed and ready for growth in Information Technology (IT) outsourcing. Total European IT outsourcing is estimated at around $15 billion in 1997, and with firms fueled by the need to concentrate on their core competencies, that figure is expected to rise to around $27 billion in 2001.
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.
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.
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.
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.
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.
Outsourcing in the traditional sense a way for companies to save money is changing. The clients I talk with now view outsourcing, or some form of it, as a viable option to not only saving money, but to actually help them improve their competitiveness.
It’s no secret, but there’s a major shift to outsourcing functions or business processes. What is interesting is how different buyers and sellers of these functions or business processes are going to market.
It’s a growth industry that has not yet hit its stride. For instance, in the IT and customer care field, the breadth of what firms are now considering and are in fact outsourcing has grown so dramatically over the last year that it has become an accepted business style.
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