Approaching C-level
Transformational outsourcing is rapidly gaining traction among vendors and customers.
Simply put, transformational outsourcing involves rolling up IT outsourcing, consulting, business-process outsourcing and change management into a comprehensive package of services to help customers transform their businesses. Customers are naturally attracted to the underlying "value proposition," say industry observers, while partners like Accenture, EDS and IBM Global Services see it as a way to get the C-level executive's attention.
Commodity outsourcing deals, by contrast, are generally not a priority consideration in the executive boardroom, says Mary Tolan, managing partner in charge of Accenture's $2 billion outsourcing division. "Transformational outsourcing tends to be a CEO issue because it will have material impact on the share price," she says.
For instance, Accenture recently signed a deal with Janesbury, the UK's largest grocery chain, which calls for not only taking over the customer's IT functions, but also for helping Janesbury improve its supply chain and in-store operations. A similar deal with Hydro 1, Canada's largest utility, requires Accenture to run five in-house business processes, including HR, finance, supply chain, customer care and IT. That frees up the customer to focus on its core business and thus should have a major impact on revenues and profits.
By the numbers
Though many customers aren't satisfied with their outsourcing relationships, the outsourcing boom isn't expected to end anytime soon. Here's a sampling of data:
- 95 percent: More than nine out of 10 companies will outsource one or more IT functions by 2003, up from 70 percent today
- 57 percent: Compound annual growth rate for e-logistics outsourcing through 2004
- 60 percent: More than half of midsize companies outsource their HR functions, including related IT systems
- $100 billion: Annual outsourcing revenue will hit that mark in 2003, reflecting 10 percent-plus annual growth
Sources: IDC, Meta Group
