Business Transformation Requires Transformational Leaders
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Insight
In the last economic downturn, between 2000 and 2003, outsourcing growth did not slow significantly. Corporations got lucky. Just as IT expenditures had to slow after the heady overinvesting of the e-business bubble years, and as business slowed too in most sectors, the global services market produced two genuine safety valves to the downward pressure on costs: increased offshoring (either outsourced or in a captive center) and the growth of business process outsourcing (BPO).
The economic times present us with unique opportunities to change people, processes, and technology. We thought we saw it all after the dot-com crash. The nuclear winter that persisted from 2000 to 2003 taught us some tough lessons about how volatile technology spending can be. When we emerged in 2004 from the "end of the world," we felt confident about the future of technology spending, that it would be more balanced and predictable going forward. We, of course, were wrong. By late 2008 all bets were off once again.
Business process outsourcing (BPO) service providers have been managing and administering business processes on the behalf of service receivers (i.e., BPO customers) for decades. Outsourcing has its roots in the manufacturing industry of the early 1970s, and it has evolved into a strategic business science that organizations in many sectors, such as banking, insurance, and government, have embraced today.
Outsourcing is no longer a novel or innovative strategy. It has evolved into just another choice a manager can make as he or she thinks about how to do more and better with less. As the industry has matured, its actors have gotten better at defining sourcing strategies, crafting deals, surviving transitions, and putting in place the capabilities to manage complex, multiyear relationships.
Most Western economies are facing a recession in 2009. Organizations are downgrading forecast earnings, and stock markets around the world are at record lows. Now more than ever, boards are placing an emphasis on improved corporate governance and cost reduction. It is easy, however, to focus on short-term survival in the current market and make decisions that destroy value in the long run. Organizations not only need to weather the current storm, but also to come out of the eye in a stronger, more stable position.
Renegotiation is a fact of life for most outsourcing arrangements. Business strategies change, leaders turn over, technology and delivery models shift -- all of these changes and many others require buyer and provider to take a fresh look at their arrangement and make appropriate adjustments (whether those are captured contractually, through operating procedures, or more informally).
For the past 10 years, offshoring has been held up as the most cost-effective IT service delivery model for IT projects of all types. Now that offshoring has become well established throughout the software development industry, it is time to review the practice using real project metrics to see if it actually delivers on its promises.
