"Buyers are interested in transformation," says Joe Ragusa, vice president, Transformational Outsourcing for IBM Global Services, based in Somers, New York. They see outsourcing vendors as "change agents" who can provide the skills, processes and technology they need to enter the brave new economy. "IT is enabling," adds Ragusa.
The Web has created some strange bedfellows. Heated competitors are now working together in business-to-business (B2B) exchanges.
Buyers have always focused on quality when shopping for vendors. But today, speed to market is becoming equally important. Ragusa says buyers today want a competitive advantage in the marketplace. They want to get involved in the new economy as quickly as possible; timing becomes a deal-maker. "Today buyers aren't as interested in getting their "I's dotted" if that slows the process and prevents them from entering the market quicker, he reports.
Ragusa says the Internet has also "changed the points of pain." In the past, customers were focused on cost reduction and service level improvements when they selected an outsourcing vendor. Buyers wanted the process done "faster, better, cheaper." Today there is still an emphasis on cost. But buyers are now concentrating on a broader set of business questions.
Buyers have also changed their focus. Ragusa says buyers have adopted a totally introspective stance. The Web has turned that internal view outward. "Now buyers look at total supply chain costs," he notes.
Ragusa says in addition to being cost competitive, vendors now "must have flexibility" to help their buyers grow. IBM tries to "add business value" to each of its customers.
For example, IBM formed a partnership with Ford Motor Company to build an ebusiness infrastructure for the car maker. Ragusa estimates Ford will enjoy a 30 percent cost reduction in application development productivity and will cut its time to market by more than half.
The outsourcing market has morphed into IT-on-demand. Buyers are looking for Web-enabled utilities, especially for their wireless and Web devices. "Mobility is becoming key," he says. Ragusa reports IBM is equipping its ebusiness centers with wireless capabilities.
At Zurich's international airport, Swiss Air, an IBM client, has rewired its terminal area. For the past year a Swiss Air traveler can receive a message on his Palm Pilot or cell phone telling him his seat assignment and assuring him his frequent flyer mileage is already logged in the system.
IBM is noticing a spike in demand from its Web hosting clients for managed data storage. Customers want their vendor to provide storage on demand and be able to scale rapidly.
In the past, the chief information officer (CIO) was central to any outsourcing agreement. But the Internet has added one (or more) degrees of difficulty to IT engagements. Today there is "more complexity in the decision-making process," says Ragusa. Today a committee convenes to make a buying decision.
Lessons from the Outsourcing Primer:
- Buyers are interested in outsourcing as a force for change.
- Cost savings were always an important reason to outsource. Now, speed to market is becoming a critical driver, too.
- Buyers expect their suppliers to add value to their businesses.
- Wireless computing will become more important as being mobile becomes increasingly important.
- Former competitors are joining hands in B2B exchanges.