Spreading Your Outsourcing Bets Chapel Hill NC

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Originally published at Internet.com

Businesses are beginning to adjust their outsourcing strategies in favor of multi-sourcing to spread the risk, and improve their governance to ensure better outcomes.

Those are some of the conclusions reached by outsourcing consultancy Brown & Wilson Advisors, whose founders are the authors of 2005's The Black Book of Outsourcing. That book is designed to help companies update their business strategies to effectively address outsourcing, as well as provide information on some key outsourcing vendors.

The consultancy also annually updates its list of the top 50 best-managed global outsourcing vendors, as well as a variety of sub-lists for specific categories ranging from Information Technology Outsourcing (ITO) full service consultants, ITO global end-to end, ITO ERP management, mid-market IT outsourcers, and many more, including non-IT outsourcing.

In 2006, Affiliated Computer Services, Satyam, Cognizant, Perot Systems, and Infosys topped the list of the top 50 best-managed global outsourcing vendors, based on data received from some 12,000 unique votes.

As the company prepares to launch its 2007 survey, Brown & Wilson co-founder Scott Wilson shared some of his impressions of the evolving outsourcing arena.

bITa Planet: How are companies changing the way they work with outsourcing vendors?

Wilson: The trend is for the length of a contact to be shorter and the amount to be less in total dollars than in the past. The buyer is contracting with more than one vendor these days rather than put a contract all into Wipro or InfoSys or IBM - you're going to find a lot more multi-sourcing. It really is just a factor of the sophistication and the evolution of the buyer and the vendor.

If you have more than one vendor, you're making sure you have redundancy and overlap in mission-critical aspects of the business. So that in essence gives the buyer a lot of comfort. Buyers are looking to make sure they have the very best for their company, and they want the business spread around for risk management.

Bitaplanet: Does this have any impact on how companies are changing their internal processes for dealing with outsourcers, or are there in general any changes on this front even if companies aren't multi-sourcing?

Wilson: The buyer is getting to be more savvy about things, such as making sure they have some sort of governing body in place to ensure the vendors are doing what they say. In many cases of outsourcing failures, it was that the buyer didn't have people to oversee the whole process.

So they're going out and making sure that someone is in play in-house who takes care of making sure that these relationships are managed. In multi-sourcing, there's a greater need to have an internal staff that manages every aspect of each vendor relationship. So, because of the complexity of the contracts, you are forced to have that staff and governance team to look over every aspect, check milestones, and see that everything is done according to the contract.

Bitaplanet: Do you see any change in the way companies are addressing the "O" word and concept with IT employees who might be affected?

Wilson: Certainly with the rank and file, companies have tried to soften that blow. There's nothing that hurts more than losing your job or your colleagues around you. Many companies wrestle with that, and I think a lot of them clearly look at every aspect of outsourcing [before they make a decision].

They're not just looking at it strictly for dollars and cents. They're more conscious about it, more concerned about the employees doing those jobs, and as far as the PR aspect of it and the marketing of it internally and externally, I see a lot of companies try to not let these people go. They try to find other places for them in the organization. I think there's a little better management in that respect.

Bitaplanet: What are buyers still getting wrong when it comes to outsourcing?

Wilson: With buyers there are various degrees of sophistication and various levels of maturity and familiarity with what outsourcing is about and why they're doing it.

Outsourcing is as much of a philosophy as a kind of a business model. Why you are doing it has to be explained pretty well in a marketing plan and revision of a business plan, and you have to make sure you're doing it for the right reasons.

Are these non-core aspects, will it benefit your business? Many times the answer might be yes, but occasionally it will be no. You have to go through that whole exercise of assessing your company, and those buyers in the infancy stage of this really have to examine all that. Others have been doing it for years, and really have a terrific understanding.