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Monday, March 26, 2007

The Changing Face Of Application Outsourcing Service Provider Landscape - Part II

This is the second part of the discussion of the changing face of the application outsourcing market. So far the general sense based on party talks and discussions with executives are that – the integration of these facilities are not so seamless to the extent of providing best possible value to their customers –in terms of speed, quality and price. Independent analyses confirm that the the pricing models of indian headquartered firms are much more transparent, compared to most on-site players. Am sure the global majors would be focusing on improving on those aspects while the offshore leaders would be pushing the needle of effectiveness and enhance the levels of competition. I do believe that it may well be time to begin talking about more productivity benefits in the AO space(this encompasses a very wide ranging set of techniques, tools and technologies) and publicly come out with measures when service providers have been able to do more with less. The Indian headquartered offshore players have the challenge of maintaining and improving these impressive gains when they begin to compete and win the other 3/4th of the pie in the ADMS space. If past performance is an indicator, they will. The bigger challenge and opportunity for them would be in the much bigger IMS space – where the penetration potential is far higher.

For customers when it comes to decision on the right player for their needs, as I wrote recently, First and foremost it would depend on the nature of service that is planned to be /getting outsourced. Every type of service shall have its own set of measures of effectiveness when it comes to outsourcing. Besides every outsourcing deal is contextual in nature and has to be therefore measured in relation to its objectives. While cost, scale & speed, quality would matter for every deal at all times – the mix and sensitivity could vary depending on the deal. Besides traditional models of outsourcing may not be the most relevant for business competitiveness related deals – say a transformation initiative. In regular nearly commoditized nature of services like IT maintenance (even here there can be a range of differences in the nature of the deal), most business feel comfortable about taking near standard deals – or deals structured with minimal variations. In general , for special deals the recommended action would be to test the waters through piloting before reaching the stable zone of outsourcing and scaling up further. The level of executive support and involvement of both sides and relationship management would become a key driver in ensuring continual success of outsourcing initiatives. Also if it relates to outsourcing from a high cost location, offshoring has got to be factored in for better costs and scaling up - substantial benefits and changes would be seldom felt without that. The continual revision /change in metrics in outsourcing is a given for enduring success. The effects of multisourcing also need to be factored in the overall assessment.

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