It outsourcing revisited providers should change their attitude or else

Alfredo Saad
IT Sourcing Consultant
13/07/2015
https://br.linkedin.com/in/alfredosaad

 Typical complaint of IT outsourcing services’ buyers
 A consultative approach aiming at innovation
 Consultative approach and the digital disruption
scenario
 Prerequisites for attitude change
 Consultative approach: an opportunity, not a
problem
 Resulting changes in the IT sourcing area

 Since the beginning of the outsourcing era, during the
eighties, a typical complaint by the organizations that
outsource their IT services is made explicit during the
satisfaction surveys periodically conducted by the
providers
 It concerns to their perception about a certain amount
of provider inability to promote innovative ways of
providing the services

 Such attitude would impact positively the buyers
organizations regarding to:
 The efficiency and effectiveness of their business operations
 Their competitiveness and agility in the market they operate
 The treatment of the permanently mutant requirements of
their client community

 Although buyers organizations typically recognize the
provider’s ability regarding the fulfilment of their
tactical and operational contractual obligations, they
resent a provider’s consultative approach, aiming at
prospecting and discussing innovative alternatives

 It should be highlighted that, in theory, the search for
innovation should be a mutual motivator for both
parties:
 for the provider, because this could bring an instigating
expectation about having additional deals closed and
 for the buyer, because this could result in a better
performance in the market they operate

 It is a fact, however, that the providers, immersed in
the day-to-day contract difficulties, tend to prioritize
the contract’s operational and financial stability
 A restricted short term view relegates to a secondary
role (rarely accomplished) the intention to assign
consultative resources which, by interacting with the
strategic level of the buyer organizations, could
generate, in the medium term, the mutual and
significant benefits shown earlier

 Such complaint of the buyer organizations, long observed,
become a critical factor in the current digital disruption
scenario ...
 ... where many new technologies (cloud, IoT, big data,
analytics, wearables, 3rd platform, mobile apps, among
others), emerged during a relatively short period of time,
boost more quickly than ever the importance of the variables
involved
 Among these variables (note that some of them are mutually
conflicting) we can highlight: competitiveness, agility,
efficiency, effectiveness, cost reduction, time-to-market,
market share, compliance, regulation and legal obligations

 This criticality, increasingly prevalent and urgent, has
forced the providers of IT outsourcing services to
change their attitude as a reaction to the pressure of
their clients.
 The need for such radical and mandatory change
actually allows the two opposite attitudes seen next

 ... the change occurs, making viable a significant
deepening on the client-provider relationship, with
mutual benefits through a solid and enduring
partnership as seen below:
 For the buyers the effective accomplishment of the
variables seen previously
 ... and for the providers , a strategic and value-added
differentiation relatively to its competitors

 - ... the change does not occur, encouraging the
clients to search for providers which show up as
more responsive to their requirements
 This would progressively reduce the importance of
the current provider on its market, which ultimately
could have its business operations limited to mere
technical and low-skilled tasks

 It should be noted that the provider’s decision to
change has at least three prerequisites (seen next)
that must be accomplished
 Both are not necessarily easy and quick to be
accomplished and do not depend only on a straight
executive decision ...
 ... although the change seems to be mandatory anyway

 A genuine and persevering desire towards the attitude
change through the consideration of long disregarded
factors should happen:
 1st. prerequisite
 A fair balance in the operational and financial contractual
decisions, assuring that the medium and long term vision
will be considered, aside with the achievement of the
short term objectives

 2nd. prerequisite
 A negotiated contractual risks sharing, aiming at an
innovative charging mechanism, based on risk-reward
concepts, which must reflect the real benefits brought to
the business of the client
 3rd. prerequisite
 The capability to acquire and maintain the new technical
and consultative skills required to support the clients
during the journey to an effective adoption of the new
digital technologies

 It should also be emphasized that, more than a risk to
the providers, such transformation must be seen as an
opportunity to achieve a consolidated competitive
advantage in the newly “revisited” IT outsourcing
market
 This is especially true for those current provider-client
relationships governed by “traditional” outsourcing
contracts

 The current providers must be conscious that they
should support, with a consultative and strategic
approach, the anxieties shown by the clients
concerning the adoption of the new digital
technologies
 This “new” attitude will result in a long term
partnership, which gives them an enormous
competitive advantage as compared to their
competitors

 The probable price to be paid is a partial revenue loss
in the short term (for instance, as a consequence of
the migration of legacy environments currently
supported in a traditional data center infrastructure
towards a cloud environment), but with the
perspective of a significantly bigger revenue in the
medium and long term, associated to new strategic
and value added services

 This revisited scenario will certainly bring a deep
change in the IT sourcing area, both under the
viewpoint of the providers and the buyers, with
significant impacts over all the components seen on
next slide

 Definition of business drivers which motivate the sourcing
decision
 Definition of the sourcing strategy (ITO? BPO? Cloud? Hybrid
blend of the previous alternatives?)
 Provider(s) selection and contract(s) negotiation
 Services transition and contract(s) governance
 Measurement of services effectiveness to the client’s business
operations (not only its efficiency)
 Relationship and integration among IT and stakeholders
 Provider(s)
 Buyer’s lines of business
 Horizontal departments such as Legal, Finance, Procurement, Human
Resources, Taxes, Auditing, Risks, Compliance, etc.

 In general terms, there is a perception that the
attitude change is occurring, although in an excessively
conservative manner, and with a lower than reasonable
speed as compared to the needs demonstrated by
client’s anxiety and urgency

It outsourcing revisited providers should change their attitude or else

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