Dallas,
TX - August 6, 2007
- Demand remains strong for outsourcing of information technology
services, but buyers are requiring more from their providers according to a new
study from Alsbridge. The survey of 300 corporate buyers indicates
that quality remains a big concern for companies using offshore service
providers. The research also found that buyers continue to experience numerous
challenges with the IT providers and are unable to realize all the benefits
associated with IT Outsourcing (ITO). While
they are largely achieving their cost reduction goals, the biggest gap between
benefits sought and realized was found in hard-to-measure areas, such as
innovation, speed and flexibility.
“Providers focus on delivering to a contract in many cases,” says Ben
Trowbridge, Alsbridge CEO. “Corporate
buyers of outsourcing services need to build innovation, flexibility and
relationship management into their working interaction with providers. These are difficult to build into the
language of the contract, but should be dealt with as a part of governance.”
The survey was designed to assess the buyer’s view of information
technology outsourcing (ITO) and to determine the key benefits and challenges
associated with their outsourcing strategy.
More than 40 percent of the participants represent organizations with
annual revenues of more than $1 billion and more than 1,000 employees. Approximately 80 percent of the respondents
indicate they are currently involved in IT outsourcing.
According to the survey results, the level of satisfaction with ITO is
moderate across the general IT functions with “somewhat satisfied” being the
most popular choice. Buyers are
particularly concerned with quality issues, missed deadlines and cost overruns.
The research also demonstrates that almost half of the respondents
claim that their ITO projects are either unsuccessful or partially
successful. This closely correlates with
another important finding – a large number of ITO contracts are being
considered for renegotiation in the near future, primarily due to poor
satisfaction levels of companies with their ITO providers.
“Dissatisfaction affects both the buyer’s business operations and the
profitability of the provider,” says Trowbridge. “Best practices in outsourcing strategies
require monitoring and measuring satisfaction levels against qualities of the
contract and relationship. Usually an
outside firm is required to provide an objective evaluation of the situation.”
The survey also shows that as buyers have increased their portfolio of
IT services operations in various global locations, the importance of managing
risk and the relationship with the service provider has increased significantly.
The issue of flexibility in relationships with the IT providers was cited among
the top factors that contribute to the success of an ITO engagement.
Alsbridge has released version 2.0 of its Market Reality Assessment
(MRA) a benchmarking tool that helps customers and providers identify the gaps
in their perceived contractual position and relationship. Trowbridge says measurement tools like the
MRA are essential to establishing the outsourcing relationship, monitoring its
health, and supporting negotiations for renewals or contract changes.
The MRA provides a benchmark based on a rigorous assessment of over 300
outsourcing transactions. It provides an
objective, fact-based way to quantify the features of an outsourcing
relationship that make it successful.
The MRA, which can be used for contract development or to assess
existing contracts, generates a dashboard that enables client executives to
quickly understand and focus on the key areas of their contract and
relationship that need improvement.
To learn more about the Alsbridge Market Reality Assessment and
contracting best practices, visit www.outsourcingleadership.com/mrasurvey.html