In 2001 Mike Jones, president and CEO of (i)Structure, an IT outsourcing supplier based in Omaha, Nebraska, says "a lot more people started paying attention to server-based outsourcing. They were more interested in finding out how these arrangements work."
However, (i)Structure did not see a big increase in the number of new deals it signed. Instead, the company says its prospects are "getting their hands around what they need to do to get ready to outsource."
Jones believes the supplier will sign many of these deals this year. He is expecting an increase in activity as the prospects have had time to prepare for the change. In 2002 he expects to sign on more customers but to smaller deals.
Jones says cost savings, which used to be no higher than No. 5 on every chief information officer's (CIO) priority list, has moved to at least No. 2. "CIO's are spending more time on cost-cutting measures," the (i)Structure CEO reports.
The stabilization of the server environment is another reason companies are now ready to outsource. Until recently, Jones says the server technology environment was relatively new and very dynamic, causing CIOs to want to supervise this function in house. "It was hard to conceive of turning this over to someone else," he says.
IT and BPO Become a Single Offering
Now, at last, CIOs have a comfort level. "It's easier to put an outsourcing contract in place that will stand the test of time," says the CEO.
Jones predicts this year the outsourcing world will see "an acceleration of technical infrastructure outsourcing combined with business process outsourcing (BPO)." The economy is forcing companies to focus on their core competencies. These companies will outsource both the technology and the business process to an expert. "Does a computer manufacturer need an internal logistics function? Does an IT outsourcing organization need a large marketing group?" Jones thinks in this economy the answer is a resounding "no."
Lessons from the Outsourcing Journal:
- Last year CIOs increased their interest in outsourcing their server environments. This year they will actually begin their outsourcing efforts.
- As companies focus on their core competencies, they will outsource their other business processes. This will include the IT portion of that process.
- The server environment has become more stable, making outsourcing a more viable business option for a CIO.
- Cost savings initiatives are at or near the top of CIO's priorities.