Outsourcing About More Than Cost

February 12 2007 - A report from IT services company Unisys predicts that the predominant trend in outsourcing for 2007 will be the expectation that service providers can deliver more than improved processes and cost limitation.

Brett Hodgson, managing director at Unisys New Zealand, said:

"Whatever the levels of maturity in outsourcing in different countries in our region, the theme from customers is consistent. Outsourcing is the means to change, and deliver more to, a business or a government. Today it's so much more than the means to changing or improving or managing just the processes of a company.

"The ability of outsourcing to do this plays directly to the profitability of businesses and to the speed with which they can react to market demand. The days of thinking of outsourcing as being just about cost are over. Effective identity management, effective data protection, and effective protection of intellectual property will all influence the choice of outsourcer, because the customer is also outsourcing its reputation."

The report argues there are four factors influencing this trend:

1. Business growth is increasingly an objective of outsourcing - Outsourcing IT infrastructure offers a flexible and cost-effective means of enhancing customer loyalty by improving customer service, response times, IT innovation and return on investment. The report suggests that business process outsourcing will increasingly be seen in these terms.
2. Use of outsourcing to access skills - Outsourcing where skills are at a premium will facilitate flexible, cost-effective access to specialist expertise, balancing supply and demand. The report suggests that there will be increasing reliance on offshore resources and short-term contracts particularly within infrastructure and networking integration projects.
3. Global sourcing - The report predicts that this trend in IT and business process outsourcing will continue and become more accepted in public as well as private sectors. Service providers will increasingly require risk management expertise (for example in data protection). Outsourcing will focus more on accessing top IT skills than limiting costs. The report suggests that familiar offshore options such as India and China will be complemented by growth in New Zealand, Malaysia and the Philippines. Accessing skills from low-cost countries (on-shoring) will also feature.
4. Increased use of outsourcing in the financial services sector - The report argues this will be driven by the need to maximize profits and flexibility with an emphasis on intelligent customer relations. Outsourcers focusing on hosting, applications development and infrastructure management will enable banks to focus on their customers. The report predicts that consolidated infrastructures will increase along with mergers and acquisitions; the need for effective data protection will continue to be a priority.

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