As mega outsoucing deals begin to lose their shine, is it time for selective sourcing to take centre stage?
After a number of public mega-deal outsourcing disasters and disappointments, organisations are becoming more confident about picking and choosing a range of suppliers whilst retaining some control of their IT.
Qantas AU$1.4 billion deal with IBM and Telstra in May, is a classic example of how some companies are shying away from handing over full control of their IT to a third party and are taking a more picky approach.
Andrew Richard, MD of KAZ Technology Services, says that selective sourcing can best be described as taking a vertical or horizontal slice of your business operation and paying someone to do it for you. "It could be anything -- IT services, desktop, service desk, or the management of the datacentre," he says.
Selective sourcing, says Richardson, is a definite trend as it allows customers to more readily identify and achieve benefits, as well as providing better price visibility. "If you look at the mega deals, suppliers were charged with huge responsibility, and a broad and deep chunk of IT operations was being thrown over the fence to a single provider. In most cases they haven't delivered the business benefits expected," he explains.
What is wrong with mega-deals?
Firstly, says Richardson, mega-deals create an environment for the misalignment of business and IT. "They are typically done on a keen price front, where the service provider expects to make money over the long term and manages the contract very tightly."
"What you have in practice is the supplier trying to generate more revenue from the contract to achieve their goals, often by enforcing the deal to the letter. Customers are now saying 'This task used to be really easy, now I have to wait two weeks for it to be done and pay AU$500 for something that used to take half an hour'," he adds.
Selective sourcing allows for a clearer field of responsibility, is often more manageable, allows for easier alignment of the supplier and customer's needs, and more opportunity to choose best of breed partners, says Richardson.
"It gives the CIO the opportunity to take control of a company's IT strategy back from a third party," he says. "The Qantas deal with IBM and Telstra proves that selective sourcing doesn't necessarily have to be small -- it means focused. However, if you are a small corporation you might not have the scale or critical mass to generate a return on outsourcing if you carve it up into smaller chunks," he adds.
| • Outsourcing: The trouble with mega deals |
| • Transparent and flexible |
| • Scrutinising the pros and cons |
| • Case study: Qantas selects IBM and Telstra in AU$1.4 billion deal |
