australia
Outsourcing

Violet Yeo and Harsh Vardhan (Australia) - Outsourcing in the New Normal

What will the future of business outsourcing be like? Will it continue to be one of the top business trends in the next 10 years?
  
It has been estimated that Australia potentially benefits from offshoring to the tune of US$400m per year. A decade ago, the base appeal of cost savings and the shortage of skills locally were attractive enough for companies to engage in outsourcing, with over 40% of the information and communication technology spend in Australia being contributed by the government.   
  
In the 1990s, the opportunities for many service providers were limited. Due to the sheer size of the clustered contracts by government agencies and the requirement for large capital guarantees and liability insurance ensured that even if a company or consortia had the capability, then these bid prerequisites kept them off the shortlist.

In addition, the clustered contract structure required huge resources to mount a bid and limited bid times ensured only the big end of town could tender meaningfully.

This lead to highly prescriptive contracted service levels that prevented any cooperation between vendor and client to achieve goals. This resulted to a significant impact and spiraling costs as organizations had to rely on contracting individual specialists to get the job done. Being a relatively parochial market driven by relationships, this meant a mushrooming of communities in the IT services organization with significant number of contractors. 
  
The Australian ICT sector today continues to remain diverse and fragmented and can be characterized as follows:

 

  • Large players (mostly multi- national, excluding the carriers) who are  generating the bulk of revenues;
  • Smaller companies (mostly domestic) who are generating innovation and exports;
  • A broad (and becoming broader) product spectrum from software and media  content to electronics manufacturers;
  • Telecommunications generating 40% of the ICT industry's revenues; 
      

We have since seen a shift from single vendor outsourcing to organizations today adopting a multi-vendor approach or more flexible approaches to outsourcing.
  
Organizations adopting outsourcing today have a certain level of maturity in terms of processes, governance and vendor management in order to make the multi-vendor model work.
  
The growing trend to provide more detailed service requirements, terms and conditions in outsourcing contracts is due to the maturity of the marketplace and buyer knowledge signals that organizations are taking active steps to ensure quality whilst improving costs control.
  
While relationships still play an important aspect in doing businesses in Australia, increasingly, we see that optimization is the new normal. Outcome based outsourcing will take centre stage as organizations take incremental and pragmatic steps to focus on achieving best in class, standardized and optimized new delivery models alternatives such as Cloud Computing and software-as-a-service become more acceptable in today's enterprises.     

 

 

Harsh Vardhan  is the Vice President Marketing for Asia Pacific at HCL Technologies He is also responsible for the overall marketing and alliance strategies for the region and building the brand through various below the line marketing initiatives.

Violet Yeo is the Group Manager for HCL Technologies at Australia and New Zealand. She has over a decade of industry experience in IT services and B2B marketing.

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