Getting Value from Your Service Provider

by Steve Coper

Outsourcing Buying Behaviors Are Changing and IT Services Are Becoming More and More Commoditized—Are Service Providers in the Value Game?

Systems Integration, BPO and ITO providers are increasingly being asked to differentiate themselves through their solutions and their ability to commit to linking services to value creation. The alternative is to submit to the “low price” auction process for cookie-cutter solutions. The market is bifurcating into commoditized services that offer low value, contrasted with solutions that enhance shareholder value and allow service providers to achieve a level of intimacy with their customer, along with an acceptable level of risk and responsibility.

WGroup believes clients should make “fact based” selection of providers rather than an instinctual selection. Ensuring the integrity of the solution is paramount. Finding the appropriate market-pricing for the solution is somewhat less problematic. Cultural matches are important.

The logic for win-win transactions based on market pricing is obvious to us as a prerequisite for success. We do not consider sourcing deals to be procurement transactions and consider all of the dimensions of risk and relationship, including future investment impacts, skill requirements, technology upgrades and refreshes, as well as IT and business process re-design. WGroup works with clients to align sourcing strategy with where they envision their business in the future, rather than creating your “mess for less.”

Further Reading: WGroup recently published a Strategy Brief titled “Governance and Relationship Management.” Click here to download a complimentary copy.

The Importance of Business Driven IT

by Steve Coper

The pressure to reduce IT spending continues and companies have had to become more sophisticated in their approaches to finding and maintaining those cost reductions, conversely, we are beginning to see more CIO’s challenged by the prospect of driving IT initiatives which are focused on revenue increases. 

WGroup’s calls this “Business Driven IT” and it is a reality that has changed the role of the CIO forever. Today’s CIO’s are questioning ALL of the work that is being done by their organization. The rationalization of services and the linkage of IT services to measurable business value is a trend that is gaining significant momentum. WGroup is seeing this impact in the way Service Levels are constructed and managed end-to-end business process measures.

The economic climate has certainly impacted the way CEO’s and CFO’s view IT. They have found that IT assets do not need to reside on their balance sheets in order to deliver value. Nimbleness associated with variably priced IT services, sometimes delivered through “Cloud” solutions offer the kind of flexibility that is required in this economy.

Further Reading: Learn more about WGroup’s perspective on 5 disruptive trends impacting business and IT strategy

Deciding to Outsource or Re-Engineer First

by Eric Liang

BPO: Should CFOs Transfer Work Before Re-engineering Processes?

Many organizations do not believe they should outsource any business processes until they are consolidated, standardized and re-engineered. This position is frequently reinforced by many of the mainstream management-consulting firms.

The logic being… if the processes are not reengineered before I turn them over to the provider, I am giving away monies to the provider to optimize the processes. They may even charge me more on a run rate basis for operating the processes.

If an organization is very good at project execution and very good at dealing with the politics of change, then the logic of reengineering the work in-house may prove to be correct.

However, in WGroup’s experience most companies are experts in the goods or services they make or sell, but are not experts at project execution and are challenged by the politics of change. Therefore, we maintain that in most cases it makes much more sense to let the outsource provider do the consolidation, standardization and re-engineering work on the processes. Provider organization’s core competency is improving and operating processes.

Further Reading: WGroup recently published a Strategy Brief titled “The Next Generation IT of Outsourcing.” Click here to download a complimentary copy.

 

The Next Generation—Linking ITO to Value Creation

by Denis Desjardins

Changes in the outsourcing industry are subtle, but are increasingly having significant impact. The commoditization of many IT services, the obvious shift to multi-sourcing global service delivery models and the leverage of labor arbitrage have had significant impact on the industry over the past 25 years.

More recently WGroup is seeing an emphasis on linking outsourced services to value creation. cars domain In many ways we are moving from the price-focused procurement era into a more sophisticated time that requires all IT services to be linked to value creation. There are a few trends that are influencing this shift; including the shift in responsibility for IT to the business, and the imposition of the discipline of IT Portfolio management through structured IT Governance models. 

Further Reading: WGroup recently published a Strategy Brief titled “The Next Generation IT of Outsourcing.” Click here to download a complimentary copy.

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