When looking for outsourcing success, companies should pay heed to a number of considerations, writes Martyn Hart. Ultimately, a realistic approach to offshoring and outsourcing will reap rewards
In late 2006, NIIT, the global IT organisation, acquired a controlling interest in ROOM Solutions Limited, a US$ 25 million, UK-based insurance solutions provider headquartered in London in order to establish an onshore development capability in the insurance market, demonstrating the changing face of outsourcing.
Global players are starting to deliver on a more localised scale – and this is the foundation of multishoring. In a bid to establish “chase the sun” delivery models, service providers are having to use a mix of onshore, nearshore and offshore operations to provide cost effective and optimum quality service for users.
Spreading it thin
Rather than selecting a one-stop-shop supplier to work with, many end users are now opting for a multi-sourcing option. They may have a centralised sourcing team, which decides which elements of processes should be outsourced, or offshored to different suppliers, or which should be kept in house.
This method of outsourcing requires more time and resources on the client side, but also allows the client more flexibility in terms of negotiation on prices and contract terms, as well as being able to select a best of breed supplier to deal with the areas that they specialise in. The problem with mass outsourcing deals is that no one supplier can be an expert in everything.
But many a project has gone belly up because the supplier’s working practices don’t sit well with those of the end user, or the end user’s expectations are at a complete tangent to what the supplier is focused on delivering. This is why the cultural aspect and the legal structure of the partnership are vital. If anything goes wrong, end users and suppliers need to be protected.
Insourcing – in house knowledge and skills
Another trend that has come to prominence has been insourcing. End user companies, either not satisfied with the outsourcing service or undergoing a change of requirements, have deemed outsourcing or offshoring unsuitable and brought the process back in-house. One such example in the retail sector is that of Sainsbury.
Having outsourced its IT service provision to Accenture, the retailer decided to end the agreement three years before the ten year tenure was due to expire. The reason for this is immaterial.
The fact remains that once a company outsources, it has to very carefully consider every factor and eventuality before deciding to bring the service back in-house. Shareholders, customers and employees may have a poor view of what they may see as wasted time and resources, which could in turn affect the company’s reputation and even its share price…
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