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Ashish Kumar Gupta Headshot

IT Outsourcing: Who's Calling the Shots?

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Being powerful - as the late, former British Prime Minister Margaret Thatcher was keen to point out - is a lot like being a lady. If you have to tell people that you are, she argued, then you aren't. It's a lesson that those considering IT outsourcing engagements would do well to consider. For too long, an imbalance in the power structure between vendors (with opaque and highly rigid contracts) and end-users has made successful, sustainable outsourcing deals a struggle for all parties to achieve. So what's the answer?

There's no doubt that the balance of power in IT outsourcing engagements has shifted considerably in recent years. Enterprises across Europe are increasingly finding themselves having to come to terms with a new world order, where the balance of power has shifted considerably in their favour. But what does this changing landscape mean, and what are the implications for enterprises?

Ten years ago, the world was a very different place. As the industry emerged cautiously, into the light of a new Millennium, there was no doubting who was dictating the terms of outsourcing engagements. Primarily as a result of a relatively immature market and a need for reassurance on the part of prospective end-users, big-name suppliers found that their services were in huge demand. Indeed, this was so much the case, that vendors were able to dictate their own terms which protected their interests under all conditions and gave very little visibility and control to enterprises to affect changes.

It's been only relatively recently that this balance of power has changed. Perhaps the best illustration of this is the significant reduction in the number of so-called 'mega-deals' being signed in the IT industry in recent years. But why did such a profound turnaround take place? There are, perhaps unsurprisingly, a number of reasons. It's clear that an increase in the sophistication of, sometimes niche, demands from enterprises, combined with increased competition in the IT outsourcing space have all played a significant role.

Today's end-users in IT outsourcing engagements have a plethora of choice, both in terms of their strategy and service provider, and they no longer seek the big name reassurance that drove a lot of decision-making in the past. Because this choice exists, and there are no longer a just few 'safe name' choices dominating the market, IT outsourcing prices are lower and services are more geared towards the customer than ever before. It's a state of affairs that is undoubtedly good for the enterprise, and also good for the industry as a whole.

There's no doubt that greater emphasis on the end-user has, in turn, placed a stronger focus on flexibility, collaboration and strong value focus through the engagement. By encouraging vendors to work with customers, and not against them, collaborative IT outsourcing engagements have become the norm, instead of the exception driving vendors to build sustainable, long-lasting relationships. In this new world order of collaboration, IT outsourcing contracts not only measure adherence to SLAs, or how often KPIs have been hit, they also need to focus on intangibles, such as added business value and the strength of the relationship beyond the contract.

By allowing the customer to adopt a position of power, it could be argued that everybody wins; engagements become more collaborative, standards are raised and all parties have the same focus of working together to achieve a common aim. But enterprises need to remember 'with great power comes great responsibility', hence the maturity and quality of the retained IT teams are critical to achieve successful outcomes which create significant value for business over the time.

Perhaps what this also demonstrates is that power itself can be a red herring. Today's enterprises aren't looking for power in outsourcing engagements, and instead focus their efforts on finding a partner that they can work alongside in order to meet long-term business goals. If the brave new world of IT outsourcing has shown us anything, it's that collaborative working can be a more effective model than a struggle for power.