Beware the Commoditization of IT Outsourcing

To find real value from outsourcing, IT customers and service providers must approach deal-making more thoughtfully--and not focus solely on price. talked to Edward Hansen, partner in the outsourcing practice of Baker & McKenzie, about the dangers of what he calls the 'over-commodization' of IT services.

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Hansen: Thinking about the buy process strategically helps. Aside from the obvious, there are two real benefits to a good buy process that are often overlooked. The first is that a strong contracting process can and should be an important pillar to a company's change management process; the second is the ability to form a high performing team that can nimbly navigate transition.

Both of these benefits start with how a buyer approaches the RFP. From an adoption standpoint, getting strong participation in drafting the RFP can help align the internal players and create ownership in a process that would otherwise be imposed on those players. Resisting the temptation to outsource the outsourcing process by engaging advisors or lawyers who just push forms goes a long way here. Expertly vetting the RFP requirements will also help get to some of those shadow requirements that may not be clearly stated otherwise.

It is also helpful to have stakeholders give a view that goes across their own subject matter expertise. Often one stakeholder is the customer of another stakeholder and taking the blinders off can give some insight into how that service should be delivered.

Thinking of the rest of the process as a learning experience and a laboratory for how the execution of the deal will work rather than a chance to eliminate providers is also very helpful. You can still down select in a timely manner, but leveraging the solution expertise that is inherent in the sales process can help get those requirements redefined to maximize deal value. And seeing how your potential provider solves problems with you is a more useful test than setting up a process that really just tests the suppliers' ability to win in a competitive process.

Customers need to rethink their timelines and balance them against the probability of realizing expected deal value.

Stephanie Overby is regular contributor to's IT Outsourcing section.

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Copyright © 2012 IDG Communications, Inc.

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