Outsourcing companies are facing increasing competition and falling contract values, giving IT managers greater bargaining power for outsourcing contracts in 2007.
According to outsourcing advisory company TPI, average outsourcing contract values fell to their lowest level in five years in the last quarter of 2006, with a year-on-year decrease of 8 percent in the value of new outsourcing deals.
TPI said on Thursday that a trend towards shorter and smaller contracts, and more specialist and single-process deals, meant that tendering activity remained high in 2006. Last year 350 outsourcing contracts were agreed, compared with 341 in 2005.
With the average contract length almost halving in the past 10 years, outsourcing competition has heightened as new players have won increasing market share.
"The market today is more competitive than it has ever been," said Duncan Aitchison, managing director of TPI Europe. "There's some good deals to be had."
"In practice, the trend towards shorter contract duration means that outsourcing providers are obliged to compete more often in order to secure the same level of business," Aitchison added. "Increased competition is clearly good for buyers."
However, greater diversity and specialisation among suppliers combined with more frequent tendering mean there will be more complexity in both the procurement process and the management of outsourcing contracts, said TPI.
IT managers are increasingly choosing companies based in India when outsourcing, particularly in the applications development and management (ADM) sector. According to TIP, India-based outsourcing companies in the ADM sector grew their market share from 8 percent in 2003 to 36 percent in 2006.
In contrast, the six largest outsourcing companies — Accenture, ACS, CSC, EDS, HP and IBM — have seen a decline from 76 percent of the ADM market in 2003 to just 38 percent in 2006.
"The figures clearly show a maturing of the India-based service providers, as they challenge the established players by taking an incremental approach and signing a large number of small, specialist contracts," said Aitchison.
"In the ADM space, for example, although they have not yet surpassed the big six, the difference between the market shares of these groups is now marginal. India-based providers are clearly considered an attractive and credible alternative to traditional players and over the next few years we expect to see them competing directly with the big six for larger-value contracts."
1/11/2007
Guidelines for the smart possible way for IT Outsourcing
According to the survey conducted, financial services companies globally are spending around $350 billion on IT per year. All these include costs for proprietary and packaged services for software and hardware requirements. From this budget, almost 35% of total IT spending in worldwide financial services firms will go to third-party service providers for software and professional services and IT Outsourcing along with software licenses. As these companies are attempting to use Information Technology as a competitive advantage, they are also searching for ways to simplify costs and for them the IT organization is always a perfect place to start with. Within the Offshore Software Development, software licensing is recognized as a puzzling and expensive cost of the IT budget. Though it is getting easier to work out and IT managers, armed with a few guidelines for the smart possible way for IT Outsourcing, can learn to lean some unnecessary costs of the projects.
As the companies want to manage the cost of the software effectively, they should have a keen understanding of the elements that are affecting licensing expenses of the software. In present scenario of Offshore Software Development, software vendors offer more service options and flexibility than ever in the past and enterprises would do better to take benefits of new ways to get more value for their investments. To do that, the customer should start from the first step of evaluating their existing software licenses in the process of IT Outsourcing. After the evaluation, it becomes easier to define if their current licensing configuration meets their requirements or not. Most reputable companies have resettlement paths that allow clients to upgrade to a more advanced technology with extra functionality when they need them. Many companies can also decrease software costs by selecting a term license instead of a perpetual license copy.
IT Outsourcing requires proper cost analysis
The fact in the competitive world is that IT Outsourcing requires proper cost analysis. Slight margin in the analysis of the cost of the project would sometimes lead to big lose. Once managers understand all the costs that are associated with Offshore Software Development, time is now to set the budget accordingly. One thing is sure that it is always easy to and more cost effective to outsource some of the functions such as HR and payroll, as compared to handle those teams and functions onshore. At present companies are also finding other non-core jobs can be managed outside of the company to gain operating efficiencies and flexibilities. So several companies have found that overseas business for major software-based jobs, like CRM (Customer Relationship Management), procurement or financial functions can largely decrease their overall operating costs of the projects.
Perfect schedule for the whole deal is also very important step. Being a client you must keep a keen watch about the meeting of the deadlines by the service providers in such IT Outsourcing services. If you find that he is not showing proper interest in such dealings then it is better to shift to the other vendors.
As the companies want to manage the cost of the software effectively, they should have a keen understanding of the elements that are affecting licensing expenses of the software. In present scenario of Offshore Software Development, software vendors offer more service options and flexibility than ever in the past and enterprises would do better to take benefits of new ways to get more value for their investments. To do that, the customer should start from the first step of evaluating their existing software licenses in the process of IT Outsourcing. After the evaluation, it becomes easier to define if their current licensing configuration meets their requirements or not. Most reputable companies have resettlement paths that allow clients to upgrade to a more advanced technology with extra functionality when they need them. Many companies can also decrease software costs by selecting a term license instead of a perpetual license copy.
IT Outsourcing requires proper cost analysis
The fact in the competitive world is that IT Outsourcing requires proper cost analysis. Slight margin in the analysis of the cost of the project would sometimes lead to big lose. Once managers understand all the costs that are associated with Offshore Software Development, time is now to set the budget accordingly. One thing is sure that it is always easy to and more cost effective to outsource some of the functions such as HR and payroll, as compared to handle those teams and functions onshore. At present companies are also finding other non-core jobs can be managed outside of the company to gain operating efficiencies and flexibilities. So several companies have found that overseas business for major software-based jobs, like CRM (Customer Relationship Management), procurement or financial functions can largely decrease their overall operating costs of the projects.
Perfect schedule for the whole deal is also very important step. Being a client you must keep a keen watch about the meeting of the deadlines by the service providers in such IT Outsourcing services. If you find that he is not showing proper interest in such dealings then it is better to shift to the other vendors.
Increase productivity by outsourcing
Outsourcing elements of our solo business to others is key to boosting our productivity and improving the overall health of our business.
However, many soloists struggle to let go of the idea of being everything to everybody. As a result, they don't have the time or energy to apply to their key strengths.
When starting out as a soloist over five years ago, I suffered the hangover from the employee mentality where doing a job meant completing every aspect.
After transitioning into consulting then finally my own business, I was still trying to work this way. Initially it was exhilarating; learning new skills, and taking on areas I’d previously avoided… bookkeeping work mostly.
After four years I realised that my lack of skill was holding back my business. Try as a might to keep on top of things, I just found much more stimulation in new client sales, networking, creating new programs, marketing, optimising my website, thinking strategically about my business and being a mum. All the things that fitted my skill set.
But eventually the cracks started to show. It was time to do a cost benefit analysis.
Here are the steps for you to follow:
* Make a list of all the tasks in your business that you are poor at -be really honest.
* Break down how many hours you spend on each task weekly
* How much does this cost your business (hours x your hourly rate*)?
* Does this represent value to the business?
* How could your time be better spent?
* Remember you might pay yourself a certain hourly rate, but what do you bill yourself out at? A consultant charging $2000 per day is $250 per hour. This is the lost opportunity cost and should be used for your calculation here.
After completing this exercise, I determined that my 10 to15 hours on bookwork, chasing up bad debtors, paying bills, completing the BAS and issuing invoices represented gross inefficiency.
So I went in search of a specialist. My bookkeeper can do in four hours what took me 15. At $25 an hour this represents awesome value. Not only does it free me up to generate more business, the heavy weight of guilt is no longer upon me. Each week, month and quarter, I receive a breakdown of the business and can really make decisions like a business owner. Instead of being bogged down in the detail.
Seven months later and I’ll never look back. We have doubled our business. I have just engaged a part time PA to systemise my client service protocols and handle new client enrolments. Again this has freed me up further to focus on business development.
I am still a soloist, I simply use the services of other soloists to grow my business.
There are specialists in every area you could think to outsource:
* IT & web solutions;
* Sales
* Marketing
* Bookkeeping
* PR
* Travel
* Service
* Secretarial
* Advertising
* Branding
The list goes on. The key to maximising the growth of your business through this process is identifying your key strengths and applying the extra time and energy there.
However, many soloists struggle to let go of the idea of being everything to everybody. As a result, they don't have the time or energy to apply to their key strengths.
When starting out as a soloist over five years ago, I suffered the hangover from the employee mentality where doing a job meant completing every aspect.
After transitioning into consulting then finally my own business, I was still trying to work this way. Initially it was exhilarating; learning new skills, and taking on areas I’d previously avoided… bookkeeping work mostly.
After four years I realised that my lack of skill was holding back my business. Try as a might to keep on top of things, I just found much more stimulation in new client sales, networking, creating new programs, marketing, optimising my website, thinking strategically about my business and being a mum. All the things that fitted my skill set.
But eventually the cracks started to show. It was time to do a cost benefit analysis.
Here are the steps for you to follow:
* Make a list of all the tasks in your business that you are poor at -be really honest.
* Break down how many hours you spend on each task weekly
* How much does this cost your business (hours x your hourly rate*)?
* Does this represent value to the business?
* How could your time be better spent?
* Remember you might pay yourself a certain hourly rate, but what do you bill yourself out at? A consultant charging $2000 per day is $250 per hour. This is the lost opportunity cost and should be used for your calculation here.
After completing this exercise, I determined that my 10 to15 hours on bookwork, chasing up bad debtors, paying bills, completing the BAS and issuing invoices represented gross inefficiency.
So I went in search of a specialist. My bookkeeper can do in four hours what took me 15. At $25 an hour this represents awesome value. Not only does it free me up to generate more business, the heavy weight of guilt is no longer upon me. Each week, month and quarter, I receive a breakdown of the business and can really make decisions like a business owner. Instead of being bogged down in the detail.
Seven months later and I’ll never look back. We have doubled our business. I have just engaged a part time PA to systemise my client service protocols and handle new client enrolments. Again this has freed me up further to focus on business development.
I am still a soloist, I simply use the services of other soloists to grow my business.
There are specialists in every area you could think to outsource:
* IT & web solutions;
* Sales
* Marketing
* Bookkeeping
* PR
* Travel
* Service
* Secretarial
* Advertising
* Branding
The list goes on. The key to maximising the growth of your business through this process is identifying your key strengths and applying the extra time and energy there.
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