7 keys to transformational outsourcing success

Enterprises are investing in transformation-enabling IT services with mixed results. Here are the keys to a successful outsourcing partnership in the age of digital transformation

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With digital transformation all but mandatory across industries today, that innovation imperative is impacting every part of IT, including its outsourcing engagements. However, many CIOs are struggling to integrate third-party IT services deals into their long-term business strategies. Indeed, a recent Everest Group survey found that 61 percent of enterprises pursuing digital transformation were dissatisfied with their service providers.

This may be because there is a disconnect between traditional outsourcing approaches and exponential change. “While outsourcing in the past has had a laser focus on efficiency and costs, digital transformation is trying to deliver something different or new for the business as a whole to help them better compete,” says John DiCarlo, managing director for business transformation and outsourcing advisory firm Pace Harmon. Seemingly every IT service provider has rebranded itself as a digital transformation partner, but “little has changed in their approaches and offerings,” says Phil Fersht, founder of outsourcing consultancy and research firm HfS Research.

Something has to give if customers want to see results — and IT service providers have the potential to be a valuable resource. “Outsourcing is not going away and can be a key enabler of digital transformation if outsourcers are willing to evolve and have flex in their contracts to accommodate new services,” DiCarlo says. Customers, too, must begin adjusting their outsourcing approaches if they want to move beyond cost and efficiency improvements to truly transform their businesses with the help of key IT partners.

Outsourcing customers are already increasingly investing in transformation-enabling IT services. “Digital has become the underpinning of all outsourcing relationships — irrespective of scope, scale, or complexity,” says Rajib Datta, lead partner for ISG Digital Strategy & Solutions. ISG’s outsourcing market indices show that the value of as-a-service deals, for example, have grown every quarter since 2015. More than a quarter of revenues for the top 20 outsourcing providers are generated by digital services, according to Jimit Arora, partner in Everest Group’s IT Services practice, with those markets growing as the traditional services market is shrinking.

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