Dynamics of Outsourcing in 2005

Douglas Hayward, a senior analyst for Ovum, a UK-based advisory that consults on technology and market changes in software and IT services, writes a thoughtful piece about some of the current dynamics in outsourcing.

2005: transformational outsourcing gets harder,” in particular, discusses the battle going on between two ambitious forces.

On one side reside those service providers combining their services with consulting to create what is being labeled “transformational outsourcing.” They believe in the economic benefits of “bundling” services and consulting. He says Accenture falls into this camp.

On the other side are firms that offer stand-alone consulting — he lists Deloitte and PA Consulting. They argue that executives need “independent” advice, which means advice that doesn't come from the same company providing the services themselves.

Mr. Hayward suggests that these “trusted advisors” will “persuade CEOs not to rush into transformational outsourcing contracts. They'll advise customers to do business transformation work first (using the trusted advisor, of course) and to sign outsourcing contracts as a last resort only…”

It all comes down to who owns the “CEO relationship.”

Into the mix he throws multi-sourcing, which gives the CEO the impression that somehow he or she is owned by nobody and can pick and choose among best-of-breed solutions. That in itself introduces complexity of delivery and management overhead.

These battles of titans only complicate the outsourcing options.

The bottom line — and here I don't quote anybody but myself — is that the going isn't easy (not at the top of the outsourcing process, nor at the bottom nor anywhere in between, where we play). When you hear somebody state that he or she has the solution, that's when you should really start asking the questions.