"Outsourcing is in a period of extraordinary and unprecedented change. The size and nature of current deals reflects an increasing desire for short-term, flexible solutions to increasingly complex business problems during a period of vast economic uncertainty.
This shift is driven by a wide range of factors that challenge modern business and the traditional view of what an outsourcing deal should look like. The ‘mega-deal’ is becoming increasingly rare and the increased level of technological commoditisation with most business and IT processes available as-a-service’ allows many firms to create multi-sourced environments.
Large numbers of smaller, short-term deals may provide increased specialism, but they also increase complexity. Service providers may view this as extremely negative, having to respond to a larger number of lower value RFP’s for shorter terms with increased competition. If successful, the service provider then has to deliver services to a larger number of smaller value clients while being acutely aware of the clients’ ability to contractually walk away in a comparatively short time frame.
This scenario is real: one leading outsourcer recently explained how they have re-engineered their sales processes to accommodate £1m+ deals (previously £20m+) and respond within two weeks (previously six to eight weeks). From a client perspective, this change could be seen as extremely positive; suppliers offering great prices and great service without the need to contract for long periods means clients shouldn’t have to dig deep into their finances or bet the ranch on a single service provider.
However, experience suggests that just because an organisation could take advantage of smaller, short-term deals, it doesn’t necessarily mean that it should.
- Outsourcing deals should support an organisation’s vision and strategy. Smaller, short-term deals are often reactive by nature, occasionally solving an immediate issue but usually failing to deliver long-term value
- For short-term deals to work well they invariably need to be highly commoditised, primarily because there isn’t enough time or money to develop, implement and embed more tailored solutions. But a clumsy procurement process can cause both parties to fail to grasp the fundamentals of a deal and leaves everyone feeling short-changed