Challenges
The focus of information technology outsourcing has shifted from just efficiency improvements to more comprehensive value creation. Companies are looking to their outsourcers for access to talent they could not otherwise afford or attract. They want outsourcers to help them create business innovations with IT. Therefore, as deals move from transactional to transformational, the market trend is to move from supplier relationships to partnerships with vendors whose pricing mechanisms are more innovative.
CIOs and other executives face a number of critical questions:
What should our overall sourcing strategy be? What should we do in-house, and what should we give to external providers? How many providers should we use? To what extent do we need resources onshore, “near shore,” and offshore?
Which outsourcers, in which countries, provide the optimal balance of capability, cost, responsiveness, working style, culture, and risk?
How should we structure deals when we expect the outsourcers to bring innovation and transformation to our company?
Competencies
Navigating clients through IT and business-process outsourcing and offshoring is the primary responsibility of BCG’s IT sourcing segment. This group is organized around four major topics:
IT Sourcing Strategy. Outsourcing strategy should be part of an overall IT sourcing strategy that describes what will be done in-house, what should be done by external providers, and why. Outsourcing works best when agreements are tailored to create value for both the clients and the outsourcers. Since BCG refrains from offering outsourcing itself, we act as a truly independent, objective advisor, providing a rigorous analytical approach to outsourcing decisions.
Deal Design and Implementation. It is critical to approach outsourcing as one would approach any other large transformation project—with a strong focus on change management and rigorous program management. No less important is understanding the economics of all parties to optimize the value created and then apportioned through the deal. Our field-tested approach, which deals with design and implementation, is backed by business and technology expertise.
Outsourcing Management. Managing large outsourcing arrangements is not always a core competency of IT organizations, especially in their early years. IT organizations typically need to adopt more sophisticated practices in contract management, vendor performance management, and overall vendor-relationship management. A review of a client’s outsourcing-management situation provides an opportunity to reoptimize the deal and get a clearer understanding of the performance and value it drives. Optimization often requires review or change of the governance, the retained IT organization, the terms of the contract with vendors, as well as the scope and scale of outsourcing.
Strategy for IT Outsourcing Vendors. Vendors must have a distinctive and differentiated go-to-market proposition to succeed in the market. New revenue pools and high-margin businesses need to be explored as traditional businesses get more commoditized and margins erode. BCG’s business-driven approach to vendor strategy is focused on competitive advantage rather than technology. We bring expertise on both the “buy side” and the “sell side” of the IT services market.
We have IT sourcing experts located in all regions to bring global insight and experience to every project.