The Next Wave of Outsourcing

IT outsourcing has gone through a sea change. It has matured beyond the wholesale exercise of "cost-cutting" to become part of an organisation's strategic direction. The lessons have been learnt, the failures are well documented, and the same mistakes won't be made second time around. 

Or will they?

There is general agreement that outsourcing models have changed and that the new contracts are different from those of past years.  These changes are the natural result of both vendors and customers becoming more knowledgeable about how outsourcing should and should not work.  In addition, recent legislative changes must be taken into account when determining services and drafting agreements.

What was deemed satisfactory in a service agreement of ten years or even five years ago is now deemed barely adequate.  Horror stories of failed outsourcing ventures and the consultant-led fixation with “best practice” have resulted in sometimes highly inappropriate agreements.  Vendors in general have been painted as the villain whilst customers have been viewed as either incompetent or naïve (for not having negotiated better deals).  The truth is somewhere in between.

As more outsourcing agreements come up for renewal, organisations have become more savvy, and more wary of IT vendors' claims and promises, having learnt the pitfalls of outsourcing the hard way. They now see outsourcing in a wholly different way - as a strategic part of their IT strategy - the next wave of outsourcing is well under way! Many IT vendors are either unprepared or are ignoring it, hoping it will go away so that they can continue to use the same outsourcing models that worked in the 1990s. Those vendors that don't change will be quickly left behind as the next wave of outsourcing inevitably hits the shore.

Farrell & Associates have worked with both customers and vendors in the outsourcing arena for the last 15 years.  In addition to their own research, Farrell & Associates have analysed the research findings of practitioners and academics around the world.  This research clearly identifies what works and what doesn’t as far as outsourcing is concerned.