McCarthy's comments were echoed by several other high profile customers, Boeing included. A representative from Boeing commented at the conference that perhaps its outsourcing partner needs to take a reality check as to who is better placed to integrate complex technologies -- the company that builds the "Dreamliner" or the outsourcer.
Why your partner wants commitment
A quick analysis of the financial performance of Indian outsourcers and their push towards "valued partner" becomes clearer.
Nearly all are experiencing strong revenues as more companies send work offshore. But the strong development of the Indian outsourcing market is a double-edged sword -- with it has come wage increases for skilled Indian IT workers. Coupled with a poorly performing US dollar, these companies will struggle to maintain profit margins at their current levels.
For the first quarter of 2008, for example, HCL Technologies continued to grow its revenues significantly, and to a lesser degree its profits. In that same quarter however, it raised salaries by around 15 percent for its offshore workers and four percent for its onshore workers, while the Indian rupee appreciated by 13 percent against the US dollar.
Deeper relationships with less customers can help the outsourcer buffer these margin-eroding pressures, as it will lower the cost of sale and could ideally result in recurring revenue from shared IP.
Understanding these motivations may help CIOs structure a better deal for their company should they decide to send work offshore.
The prevailing theme among CIOs speaking to ZDNet Australia, is that at a high level you certainly can consider moving to a "partner" model rather than a "provider" model should the shoe fit. But as one speaker so eloquently put it, "keep strategy and control close to your heart. Share execution."
3%
2%
