Recent partnerships between specialized service providers and major outsourcers may signal the next phase in the evolution of IT and telecom services. These agreements pair specialized service providers with broad-based outsourcing companies to address specific enterprise IT and network needs. They offer new hope for solving vexing computing and communications issues, but also pose new challenges in relationship management that should not be overlooked.
Vendors such as Electronic Data Systems Corp. (EDS) and IBM Corp. have seen an uptick in demand for their outsourcing services as a result of the downturn in the economy. At the same time, they have witnessed a demand among enterprise customers for more “bite-sized'” out-tasking alternatives to the traditional wholesale outsourcing arrangements of the past.
To respond to this shift in demand, the major outsourcing companies admit that their existing service delivery cost models don’t scale down and are “outsourcing” a new generation of utility-oriented services to specialized service providers. Examples of these new alliances include EDS and messaging application service provider Mi8 Corp.; IBM and management service provider SiteRock Corp.; and Loudcloud Inc. and security services provider @stake Inc.
Anyone who has been involved in an outsourcing arrangement knows that the success of these relationships is determined by a strict set of policies, procedures and business practices that govern day-to-day interaction between the user company and outsourcer. The major outsourcers have spent years building their service delivery methods to ensure delivery is consistent.
Now the addition of third-party specialized service providers is testing these methods. It is not that outsourcers are inexperienced in working with other companies to fulfill their contracts; they have subcontracted many of the services that made up their mega-outsourcing agreements in the past. However, the specialized service provider-oriented services they are adding require a tighter form of technology integration and process control. The major outsourcing companies have the skills and experience to address these challenges, but will need time to assimilate the relatively inexperienced specialized service providers into their service delivery methods.
Companies considering the new generation of utility computing and communications services from traditional outsourcing companies should carefully assess how these services will be delivered. Ask questions about the service-delivery supply chain that will tie together the outsourcer and its third-party specialized service provider partners. Make sure the operating procedures governing the arrangement between the outsourcer and specialized service providers are fully documented, and spell out how problems will be identified, addressed and resolved in a timely fashion.
If early implementations of these outsourcing arrangements produce success, then the legacy of the specialized service providers will be greater than many expect and the future of outsourcing even brighter.
Kaplan is managing director of THINKstrategies, a consultancy in Wellesley, Mass. He can be reached at jkaplan@thinkstrategies.com.
