Buyers are looking to suppliers to help them grow their businesses and gain more customers in addition to the traditional outsourcing goals of cost reduction and access to top talent and new technology. "Business transformation is giving outsourcing a whole new twist," says Steve Smith, president, EDS Information Solutions - Western Region.
This year he believes business transformation will rise to the top of the list of reasons to outsource. He says corporate executives are asking his team three questions:
- What services can EDS provide?
- What services can they provide EDS?
- What can we create that we can take to market together?
Fundamentally, business is the same inside, and cutting through to cash, margin, velocity, growth and new customers are now part of the mix. Smith says IT outsourcing has changed from cost reduction to impacting corporate strategy by aligning IT with the company's business directions. This year IT outsourcing has to focus on how suppliers can help their buyers grow.
In addition, executives are looking at how outsourcing can improve the entire organization, not just departments, groups or business processes. "Outsourcing used to be simple. Chief information officers wanted us, for example, to cut their IT spending from five percent to three percent as a percentage of revenue. Now, they want that three percent to impact the other 97 percent of the organization," the EDS executive explains.
A New Need For Speed
Another new element is companies want to speed up their outsourcing transactions. "Companies are not interested in dragging out these decisions," Smith says. If EDS is the only supplier in consideration, companies are signing contracts faster "to get the benefits of outsourcing quickly." Smith reports EDS is beginning to see "much more activity" in the sole source arena.
Privacy and security rose to the top of corporate concerns after the events of September 11, notes Smith. "Companies are concerned about business continuity, preparation for terrorist and hacker attacks, and data protection," he reports. EDS, he says, has many offerings to meet this need. And EDS now has some 50 Web-based courses on cyber security in its internal education curriculum.
In 2001 EDS strengthened its relationship with the big technology companies, like Cisco, Microsoft and Sun, so the supplier could offer its customers the best of breed in new technology. "We can tell our buyers we will leverage these relationships as part of the solution," he says.
This year Smith says mobility will be an important component of the IT mix. Companies want their employees to stay connected to mission critical information via laptops, mobile phones and PDAs at anytime and from anywhere. This is part of the growing popularity of intelligent network foundation (INF) that combines applications with communications offerings. EDS partnered with Cisco to provide an end-to-end communications infrastructure that will deliver voice, video and data in a wired and wireless network to Dow Chemical employees worldwide. These next generation capabilities simplify communications into a single converged architecture, resulting in reduced engineering, less field support and lower maintenance costs as well as reduced long distance telephone charges.
Lessons from the Outsourcing Journal:
- Business transformation is an important new component in IT outsourcing. Buyers want their IT decisions to help them grow their businesses and win new customers as well as save money and gain access to new technologies.
- Single source buyers are speeding up transactions to enjoy outsourcing's benefits as soon as possible.
- Buyers want to develop offerings with EDS that the two can take to market.
- INF combines voice, video and data in one wired and wireless network to drive down costs.