CIO Straight Talk - Issue 4 - 39
Points of View
A number of
nature of IT and
to the beneﬁt of
both the buyer
The biggest business driver of outsourcing has always
been cost savings. And while cost continues to influence
decision making in the IT and business process
outsourcing markets, increasing and expanding
demands on IT organizations are compelling them to
seek more from their service providers.
As mature enterprises enter into the next generation
of outsourcing deals, they're embracing new - and
sometimes risky - models to achieve more than the
old-fashioned "your mess for less" value proposition.
"Certainly there is an evolution under way," says
Arno Franz, a partner with outsourcing consultancy
Information Services Group (ISG). "Buyers have
matured to such an extent that they are looking for
something quite different in the marketplace."
CIO Straight Talk spoke with five of the outsourcing
industry's most respected consultants about six emerging trends and what they mean for both buyers and
1. The Rise of Managed Services
Mature buyers of IT services are opting for managed
services deals over staff augmentation arrangements,
thus moving from input-based to output-based pricing.
But while the potential benefits of the model are clear -
increased value and flexibility - the approach requires
significant behavior changes from both the provider and
"In a staff augmentation deal, the client knows the
people and they're used to working that way," says Ralph
Schonenbach, CEO of Trestle Group. "When you take
that away, it's a big cultural change. It requires a higher
degree of trust, because you are allowing the supplier to
take over operations to run as they see fit." Suppliers
likewise may not be used to taking such a proactive role.
"They need to be much more innovative in reorganizing
the way people work," he says.
43 CIO Straight Talk