Focusing on ‘What,’ not ‘How’. The contract — along with effective management — also is a key issue in any discussion of common problems. Even more basic is an understanding of what outsourcing is and what it is not.
Why do customers and suppliers often mutually characterize their outsourcing relationships as adversarial? The single biggest reason is a failure by both parties to distinguish between legitimate disagreement and discussion, on the one hand, and improper and harmful dispute, on the other.
On January 1, 1999, eleven member countries of the European Union (EU) will adopt the Euro as their common currency. This move has complex implications for outsourcing in Europe. It will affect existing and new contracts and, more fundamentally, have an impact on the market structure.
Anticipating change and the likely need for future renegotiation can enable the parties to plan for it, and that preparation can provide a more cooperative environment for making changes.
Renegotiation has become a fact of life in long-term outsourcing contracts, and customers entering five to ten-year arrangements should be prepared for that.That’s the bottom line, according to Syd Hutchinson, senior consultant, COMPASS America, Inc. It’s unusual for a contract not to be renegotiated, he said. There’s no way you can see everything that far out, so you should go into these agreements prepared to renegotiate.
Strategic outsourcing — what does that phrase really mean? Discussions on the subject usually are focused on two things: structuring a strategic relationship with one or more outsourcers and the process by which the outsourcers are selected. Such discussions, however, overlook an important element.
A couple of years ago, e-commerce was just knocking at the door of the IT marketplace. Today, companies have shoved that door open and are walking through to discover new opportunities and new ways of doing business more profitably and more efficiently.
Partnership: More Than a Fancy Phrase. One of the most telling changes in future outsourcing will be the reshaping of relationships as companies continue to move away from cost reduction as the single key driver.
By the year 2002, over 50 percent of everything that is spent externally on IT services will be expended around e-business activities. That’s part of the e-business explosion predicted by Doug Elix, general manager for IBM Global Services.
While the promise of outsourcing is bright, outsourcing relationships often fail before they start. Improper guidelines, poor communication between the company and its outsourcer, and unrealistic expectationss frequently lay the groundwork for failure.
Over the past three years, strategic outsourcing has become an increasingly familiar practice — and by all accounts, it will be even more prevalent in the near future. The worldwide market for outsourcing services is expected to double in the next five years — and, according to a recent survey, a majority of executives will consider outsourcing nearly every non-core business process by the year 2010.
Are you getting ready to negotiate an outsourcing contract? If so, place flexibility high on the list of negotiation goals. Many customers involved in long-term outsourcing contracts in the past have learned the hard way that the restrictive and static nature of normal contract terms can tie their hands in the rapidly changing outsourced IT environment.
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.
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.
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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