When buyers decide to outsource today, you can bet ebusiness considerations are part of the contract. Paul Cofoni, president of the technology management group at Computer Science Corporation (CSC), says he rarely sees an outsourcing proposal that doesn’t have a substantial ecommerce component. Companies want to create a business-to-business (B2B) exchange, use ebusiness to enhance their supply chain management, or simply make it easier for their clients to have access to them.
In 1999 buyers kept ebusiness out of the scope of their outsourcing agreements because it was considered “new,”† says Cofoni, who is based in the Falls Church, Virginia office. Last year as many as 30 percent of the outsourcing deals included an ebusiness section. “I see that percentage increasing this year, too,” he says.
Outsourcing Then and Now
When the Internet was new, most of the ebusiness skills resided in the small, start-up firms. They were the pioneers of the new IT. As the Internet entered the mainstream, large IT firms retrained their employees so they possessed these skills, too. This ability is also another reason why large firms are seeing outsourcing contracts with ebusiness components.
Cofoni, who is an outsourcing veteran, says he finds very little resistance to outsourcing these days. Five years ago “we spent a lot of energy to convince companies outsourcing was a legitimate way to do business,” he recalls. Today his staff is spending that energy putting a contract together since the buyers have already decided to outsource.
Back then, vendors sold companies on outsourcing because they could prove the model could save money. Today every client is still concerned about reducing costs. But now many other items on the original benefits list, like gaining access to skilled personnel, are becoming equally important. “Companies have found other values in outsourcing that they didn’t expect when they set out to reduce costs,” says Cofoni.
This general acceptance is propelling the growth of business process outsourcing (BPO). IT outsourcing has been so well received, it has expanded the thinking of corporate executives. Now companies are asking, “What else can we outsource?” “BPO is where IT outsourcing was 10 years ago,” Cofoni explains.
The CSC executive says the supplier is focusing on its traditional market: the giant deals. Until the arrival of the Internet, this was the growth area in outsourcing. Today, however, vendors will also be completing deals with small and medium-sized firms.
Outsourcing Becomes Global
And the outsourcing business is becoming global. Five years ago Cofoni reports most of the outsourcing opportunities came from U.S.-based or European-based firms. Now, two out of three deals are multinational. Instead of allowing each business unit to make its own decision about outsourcing, the corporation is taking a unified and more global view. “Executives now view outsourcing as a total strategy for the enterprise,” he reports. This gives managers an opportunity to create a standard infrastructure which leads to the ability to share both knowledge and work.
Corporate executives have a “keen interest” in knowledge management. If a company does the engineering in America but the manufacturing in Asia, how does the business translate the necessary knowledge across geographic boundaries? Companies want to know how to make this happen, he reports. So far, he recommends creating a standard IT environment to move information around the planet.
Lessons from the Outsourcing Primer:
- Ebusiness has become a critical component of IT outsourcing contracts.
- Companies are thinking globally when they outsource.
- Outsourcing has gained wide acceptance in the marketplace as a business model.
- Companies who outsourced their IT discovered outsourcing produced other benefits, too.