There are several news clips that instigated me to write about this topic.
First, there was an interesting post in HP-EDS blog saying Offshoring is becoming irrelevant!. And Offshoring is typically meant to solve yesterday's problems. Obviously, as anyone would, I was also infected with the curiosity to get into the details and got some information in this blog.
Second, there was a blog post from the reputed sourcing advisory firm TPI. This post claims several emerging trends in the Enterprise IT sourcing units. During heydays, the Enterprise IT sourcing units would hire the consultants from the advisory firms like TPI to enable them to take informed decisions in outsourcing/offshoring. This blog post states that this trend is drastically declining and the days of large deals are almost over.
Couple of other interesting trends..
- Large Deal sizes in the range of several millions spanning across multiple years are clearly declining
- Companies have started to experiment with multisourcing models / sourcing from best-of-the-breed combination of vendors
- Offshore contracts are evaluated like never before for due diligence and continuous improvements
- Companies are expecting the vendors to collaborate to create new/additional value for them- Bespoke / Custom application development projects are declining
- Procurement slowly but surely migrates from services to Online Productized Services (SaaS) & Business Process Oriented vertical solutions that would solve a distinct problem
- Large companies wanting to regain or rebuild a control mechanism over the vendor ecosystem
Now, What does this mean for Enterprise IT units?
- The emerging patterns stress the need for continuous cost savings and service delivery innovation from the vendors
- In-sourcing / In-housing of some of the key IT competencies are clearly emerging
- As stated above, if sourcing needs to be smarter in terms of business processes, new technologies and architecture alignment, it needs to be staffed with cross-functional teams. The teams typically need to have business analyts, sourcing managers, and Technical/Enterprise Architects
- Techniques like Agile also requires more client participation leading to staffing in Internal IT- These newly organized IT teams try to demonstrate IT's value to business by attempting new standards/mechanisms
How does this unfold for Outsourcing / Offshoring companies?
- End-to-End service offerings no longer going to yield interested audience from Enterprise IT- Companies need to find ways in which they can compliment and synergize with a prevailing vendor ecosystem within a company, rather than trying to pitch its own siloed sales story
- Continuous improvements and Innovation in Service Delivery will become order of the day
- As the emerging patterns create the need for 'smarter/leaner' staffing in Enterprise Internal IT, the vendors will also be expected to match with equally smarter staff on their end. No more labor arbitrage!.
Net-Net, Offshore vendors will need to work harder and smarter to retain and grow their existing ADM businesses!.
