What Top CEOs Say about Outsourcing IT Services
Joe Tucci, Chairman and CEO of EMC Corporation, believes that outsourcing will continue and more businesses will outsource the actual business process. The example he gave was of the EMC Corporation, who does not just outsource the IT process, but the entire business process for the payroll vertical. In his views the market is slowing down and many will have to think about outsourcing. From his comments, it was also clear that one needs to look at selectively outsourcing, not just outsourcing everything. First, one needs to see what all can be outsourced, what outsourcing would help change and benefit the business, or whether outsourcing would be a benefit at all.
After the Satyam fallout this year many companies are focusing on stringent evaluations system and reorganising the outsourcing strategies. Bill Flyod, CFO, Logica UK, an IT group, points out that the finance heads are looking ever so closely at the costs and pushing their CIO’s to reduce costs and do it quickly. A survey at the end of year 2008 indicated that the outsourcing numbers would go up.
Everyone agrees that the IT outsourcing can see an increase given the economic downturn. Rob Thompson director of Sun Guard, an IT group, said that by outsourcing the lumpy IT infrastructure, the CFO of any company will gain scalability and more options to counter changes, both positive and negative.
The research done in Europe by a consultancy firm called TPI, shows that the overall number of outsourcing contracts has increased over last year. This study also found that the companies are being very restrictive in terms of payout on the outsourcing contracts. This will remain the order of the day.
Post the Satyam debacle companies are questioning the one-vendor situations. Most of them are now thinking about a two-tier or three-tier outsourcing plan, which will spread the risk. The spread of work can be in terms of spreading the numbers or sharing the business processes with different vendors. Therefore, the one stop shop concept of most vendors is no longer buying point. Since the entire business, as such, is rationalizing cost, it is no surprise that the business relationship with the vendor will also be scrutinised very closely.