The secret for IT outsourcers to grow the business is to make it easier for clients to purchase their services. Something that can be accomplished by mimicking – as much as possible – the consumer products approach.
In this first part of my post, I will take you through the current trends and how, I believe, IT outsourcing services needs to be re-invented.
Anybody working in the IT outsourcing industry would be able to tell you about the tendency of over-customizing services in this space. This behavior often ends up in producing tailor-made proposals regardless of the monetary value of the opportunity, or indeed its technical complexity. A $10m deal is usually assigned the same set of resources – business developers, pre-sales specialists, solution architects, sales reps, account managers, pursuit engineers – of a $500k deal, making it un-economical and ultimately un-healthy. Certainly unsustainable for outsourcers.
Statistical evidence shows that if you exclude a small portion of enterprise class clients, the large majority of companies would actually benefit more from pre-packaged and highly standardized IT outsourcing services rather than custom ones. Let’s look at some of the benefits for both clients and outsourcers:
Client key benefits:
- Better price points
- Convenience in comparing (“shop-around” enablement) and purchase
- Easier dismissal or contract cancellation should quality/performance fail to meet expectations
- Modular flexibility and scalability (i.e. start small, grow as trust and convenience builds up)
Outsourcer key benefits:
- Economy of scale:
- Maximization of IT infrastructure usage
- Increased leverage of engineering resources
- lower cost to provide the service
- Faster time to market, by virtue of improved client targeting
- Lower selling cost (e.g. through the adoption of self-service portals vs. deploying a large number of “hunter” sales reps and picking up the associated cost)
- Easier to convey point-of-view
- Straightforward articulation of client benefits and short term impact for the specific technical area being discussed
- Higher win rates
One needs to keep in mind that behind an IT outsourcing proposition there is always – first and foremost – a financial decision. Typically, a comprehensive outsourcing evaluation requires a thorough due diligence process that can often be:
a) complex and time consuming (for both parties)
b) expensive, if considering the time invested by people required to perform it and their lower productivity
c) potentially defocusing – or significantly slowing down – company operations for the duration of the activity.
Standardized discrete IT outsourcing services, on the other hand, will neither require due diligence nor any significant investment of time and resources to evaluate them. These services will be pre-defined in nature (scope, technical specifications, service features, price) and limited by design in terms of flexibility. It is precisely their intrinsic rigidity that will constitute their best chance to be relevant to client’s needs and hence successful.
At this stage you may wonder: it sounds like a good idea, but how do we build a credible, extensive yet simple portfolio of standardized ITO discrete services? And how do we go about selling those?
That’s exactly what I’m going to discuss next week in the second and final part of this post.
