the Next Stop in Outsourcing: Accountability

With the nation's focus on the need to create jobs, the habit of outsourcers to cite the traditional value of cheap labor will no longer be of adequate value for an increasingly sophisticated clientele.

By David Kruzner, senior vice president, iGATE Patni
Mon, April 16, 2012

Network World — This vendor-written tech primer has been edited by Network World to eliminate product promotion, but readers should note it will likely favor the submitter's approach.

With the nation's focus on the need to create jobs, the habit of outsourcers to cite the traditional value of cheap labor will no longer be of adequate value for an increasingly sophisticated clientele.

This is forcing outsourcers into a new age of value-based solutions and accountability. Accountability involves more stringent control of services delivered based on an overall business outcome (value-based) -- not according to time and materials. Relationships are structured as long-term consultations and management, not short-term labor arbitrage projects. The workforce is more skilled, as domain or vertical experts and located across the globe, including increasingly in the U.S.A

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These pressures create a tremendous opportunity for the IT industry. Here are a few things your organization should know about how to take your vendor relationship to the next level.

* Think about creating value, not lowering cost: In a traditional outsourcing engagement, IT examines a particularly manual or cumbersome process and then evaluates the options for conducting it more efficiently and frugally. But, chances are, your business has already taken that step -- you probably took it years ago. The next step is about technology-driven engineering and productivity. This productivity is measured on one key tem -- business value.

In a value-driven engagement, vendors are evaluated based on the business outcome they create, not the time and materials they consume. It's about the final output from the client's success, which is a mutually beneficial relationship for both parties. The risk is shared among both parties -- and when risk is involved, it's not just about pricing and cost. The key currency in a vendor relationship is value, which can be a welcome change for any company that's seen an outside party run up the bill based on number of FTEs.

* Align the vendor with your business: In order for an outside vendor to deliver business value, the vendor needs to have a clear idea of both the business' and IT's overall business goals and strategy. In these visibility-driven engagements, they're handled as long-term consultations, not short-term cost-cutting projects.

Outsourcers embed themselves in the IT department, using their technology expertise to suggest ways the business could be run more efficiently. In many cases, this uncovers problems or opportunities a client did not know existed. It's an additional level of sophistication, evaluated not by the needs of the outsourcing client, but by the needs of the client's client. When overall business goals are met, this creates a relationship of optimum value to the customer.

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