ITO vs. Customer

The age old norm – outsourcing refers to reducing costs continues. But if initially outsourcing is costing more than doing the job in-house then it would not worth the effort. There are scenarios where the outsourcing engagement sometimes ends up costing more than what it was initially worth resulting in contract cancellation. So the question here arises is the ITO competent enough to handle the ad-hoc customer needs? When the term outsourcing is referred to it basically points to Indian IT companies which cover most of the ITO market. Most of these companies are now well experienced with different customers and have gain expertise in different field over the years.

Initially outsourcing was conceived as a way of reducing costs through labor arbitrage offered by low cost economies such as India. However over the years these low cost economies have seen dramatic rise in costs while at the same time has built up on experience and capabilities. ITO’s have grown from being a small service provider to an organization which has high end infrastructure and sophisticated delivery management processes which has made them competent than their customers. Many organizations are heading towards India for outsourcing their business with the clear mind of improving their efficiency and productivity. Also many existing organizations who are currently engaged are striving for more innovations and strategies for their business growth.

As mentioned earlier, ITO’s have come a long way in setting up their structure and making their presence felt worldwide. These have mainly developed due to their multiple client engagements and projects which have improved their expertise in various domains. Within an ITO, there are many domain experts who you can leverage for your improving your business processes rather than you designing a solution around it. These experts have multiple client experiences which come in handy during your business requirements stage which in turn will enable you to gain maximum value from the ITO arrangement

Another aspect on which CEO’s are constantly questioned about is innovation. How do you foresee yourself while going into an outsourcing engagement with an ITO? What are the provider’s innovation ideas and methods and how it will affect the customer in the long run? For such questions, an ITO needs to be equipped with the latest emerging industry trends. Customer might be expecting some innovations whilst in the engagement but the provider might not be able to fulfill it. So it is necessary on the customer part to set their expectations clearly with respect to innovations at the engagements initial stage itself. Often providers create innovations though the work they do for the existing or new clients. The offshore team sometimes takes innovative steps in delivering their services to the client who is mile away from them. Many organizations have a dedicated team or system to harvest innovations but at the same time the client must also actively participate in establishing a framework and incentives for the ITO’s to cultivate innovation.

The key factor an ITO engagement is sustaining your business in the long run with the expected business outcomes. While an ITO is capable enough of delivering technical solutions, but have they done, what they were asked to do? The gap over here is aligning your business requirements and the provider’s solution. The simplest way to fill this gap is building a relationship between the client and the provider which is outcome based. Both the parties must be following different processes for the same outcome with different efforts. The first step is to align all your business processes, get them structured and defined in such a way that they are measurable. ITO has a clear sight once all the target/metric have been configured and agreed upon mutually between the stakeholders having a common vision of those outcomes.

About Author:

Mihir Sakhle is consultant and part of Systems Plus Pvt. Ltd. He is a part of consulting team that delivers Sourcing and Vendor Managementg Office projects. He can be contacted at: mihir.s@spluspl.com