Page II: Wholesale outsourcing has fallen out of fashion in recent years, and organisations are now becoming smarter about how far they go outsourcing partners.
Richardson also believes customers are getting the results they expected with current outsourcing strategies, now that a degree of realism has taken hold with both supplier and provider. -Government and corporate entities, as well as the service providers, are learning," he says. -The outsourcing market is going through an evolution and the average outsourcing deal signed today is much more likely to deliver the business outcomes it was signed for, compared to the deal signed five or 10 years ago."
Those early mega-deals that saw wholesale IT outsourcing were often driven by a desire to slash costs. Selective sourcing customers still expect to save a dollar, but they also expect to get agreed levels of service and are no longer afraid to pay a fair price. -Whichever way you look at it, however customers talk, when you get down to the short list, you worry about who's going to drop their price," says Richardson.
-Customers are talking a lot more about access to skills, attainment of SLAs, the ability to respond fast to changing market needs. But cost is still -- and I think appropriately -- to a large degree, a key driver. If you make an outsourcing decision that increases your cost over an in-source alternative, you have to be very clear on the strategic rationale. In managed services deals where there's a strong element of business continuity or disaster recovery, we're seeing customers who've done their homework on the shape of their business willing to pay a premium over internal delivery costs in order to get a higher availability solution for critical systems."
-The reason is that outsourcing has moved away from pure cost reduction although some cost reduction element is a given. If you can't get a rate of say 20 or 30 percent cost reduction, then it's probably not worth doing," says Holland. -But assuming you can get over that hurdle, more and more customers and clients are looking to drive transformational change. You have to win the argument from a strategic level these days rather than purely a cost reduction level. In terms of determining which bits you outsource and which bits you don't, you need to ask 'by doing this outsource, how can this organisation support our strategic three, five, 10 year agenda, and transform this company from where we are, to where we want to go?'"
Any discussion of outsourcing these days is likely to include arguments about the virtues of offshore service providers. Holland's company operates on a global level, and uses what he calls -right shore" instead of offshore, implying that like the outsourcing debate, it's now a question of choosing which components are best done locally and which can best be done elsewhere on the planet. The IT industry is still coming to grips with a process that by-and-large has already been resolved in the manufacturing industry. -Capgemini has around 100 outsourcing service centres around the globe and they have a combination of skills," says Holland. -Some are dedicated to infrastructure management. Some are dedicated to applications management. Some are combinations and some are dedicated to business process outsourcing.
-They're located in various places around the world and our approach to this is -- and it's something that we've trademarked -- something we call Rightshore. And Rightshore simply means that we'll put the front office and/or the back office of a client's support requirements wherever is most appropriate from our network around the globe. So something that is, from a business process point of view, very rules-based, information- or data-intensive, and high-volume, high-commodity type of processing, we could put anywhere in the world."
Avanade managing director Trevor Harper, also has direct experience in the offshore debate, with a joint venture in India with Accenture, primarily focused on software development. However, Avanade also has a software centre in Brisbane and sometimes the cost differential is surprising. -The overhead of managing off shore facilities and making sure that you get it right comes at some sort of premium, and it's typically somewhere between 12 and 25 percent," says Harper. -When you sit down and do the maths on what's the best way to do this, you really need to factor that in and make sure it's included in the equation."
-We are seeing people being far more selective about how they slice and dice their outsourced components out and I think the organisations that will survive in the future are the people that are going to be flexible in their approach to how they deal with that," says Harper. -I think the days of taking the whole thing and putting it out to a single vendor are pretty much fading, and it really is because the clients have [already] tried it. They've actually not enjoyed the experience as much as they probably should have, and they're now being much shrewder about how they actually do that."
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