Trends Driving Change in Outsourcing
Companies have been leveraging materials and resources from other businesses since the Industrial Revolution seeking new ways to get competitive advantage. As corporations grew in the twentieth century to large global entities, many struggled to adapt to the changing market opportunities and their continued growth. Although outsourcing wasn’t recognized as a business strategy until the late eighties, many companies looked for other service providers to support their non-mission critical components to provide cost savings and to better compete in the marketplace. Over the years, outsourcing models have continued to evolve supporting new business functions and providing off-shoring for lower cost resources.
In 2014, businesses will continue to be challenged with the constantly changing disruptive IT trends like mobility, cloud computing, and security choosing to leverage outsourcing as a way to quickly address these technologies. But companies are not just looking for support for these trends; they are looking for innovative ways to also make money using them to drive business outcomes.
Service providers, like Unisys, are responding with innovative services, tools and frameworks including stepped up security. “Production workloads with serious business impacts demand security shift to the forefront. Innovative approaches commercialized from government applications are expected in the next few years,” predicts Scott Vogel, VP NA Sales at Unisys.
Outsourcing opportunities have shifted from the mega deals of several years ago to smaller size deals with flexible terms and shorter duration. “Right sizing to the environment is critical. Outsourcers must be able to adjust to geographic changes, business trends and sales volumes,” indicates Scott Vogel. Matching the quick pace of technology change, “5-10 year deals are fewer and fewer, with 3-5 year contracts more common,” he adds.
Providers with existing contracts are focused more than ever on building solid relationships with their customers to ensure high satisfaction with their services and providing thought leadership and innovation beyond what was contracted. “Modernizing existing contracts and finding ways to diversify to show the value will help laggards,” suggests Scott Vogel of Unisys.
Vogel also predicts enterprises can benefit from multisourcing where two or three vendors may be needed because of recognized specialization. This approach requires partnerships to be formed with providers that may typically be competitors against each other to support the separate towers of service. These providers may act as peers or many times there could be a prime and sub provider relationship model. Regardless of the model, the key to success is communications and governance models across the vendors to ensure the partnership is beneficial for both the enterprise and the providers. Those providers that don’t want to play well with others may be left out of future opportunities.
For more insight on this topic, read the Outsourcing Center 2014 Forecast article on Deal Dynamics – Outsourcing Models that will thrive in 2014.