Strategic Sourcing

Outsourcing contracts typically extend over a longer period than those in the xSP market, and it is essential that companies establish a true partnership with an outsourcing provider, which allows both companies to benefit over the lifetime of the agreement. Butler Group believes that selective (or smart) sourcing is an effective option, allowing an organisation to gauge the value of the strategy, without committing the whole of its IT capability into the hands of a third-party.

An organisation choosing to outsource must clearly understand the requirements, know how implementation will take place, and be able to assess the benefits that it hopes to derive. It is therefore necessary to develop both meaningful measures of performance (which should be business-relevant rather than purely IT focused), and to build corresponding incentives into the contract. Above all, close attention must be paid to the governance of the relationship - this is the key to maximising the investment in these services.

Large companies such as IBM, EDS, and CSC dominate the outsourcing market, but there is also rapid growth in outsourcing services offered by smaller organisations that are targeted at a correspondingly smaller size of client. Butler Group believes that there is enormous potential for both outsourcing and service provision in the medium- to large-sized organisation (500 to 5,000 employees), which has yet to be successfully addressed.

Off-shoring

The use of overseas workers to deliver IT solutions is prevalent amongst large organisations, with over 50 per cent of FTSE-1000 companies adopting this strategy for at least some of their application development work. The reasons for the popularity of this type of service include: