While the outsourcing industry has grown over the years, at the same time, it has become competitive too. Though Business Managers have pressure to get new contracts signed, the job is much tougher to retain or extend your existing contracts. So what are the expectations of your Outsourcing client? Knowing them can definitely help you in your endeavor. Below are top 10 latest outsourcing trends that you should keep an eye on.
Dynamic pricing model on contracts
Most outsourcing clients are confident that pricing for infrastructure services is competitive for year one and year two of an agreement. Historically, however, pricing adjustments over the life of a contract don’t keep pace with the competitiveness of the market. So more organizations are considering techniques to ensure competitive pricing over the life of their agreements. Such techniques include predefined unit price declines, mandated benchmarks on a regular basis to check pricing, and price adjustments based on specific price indexes.
Contrary of finding a partner with a moderate expertise level, outsourcing clients are increasingly looking for more vertical expertise from their suppliers. The vertical integration between infrastructure, applications and operations will ensure efficiency, accountability and alignment between business strategies and enabling services.
Result based commitments
With latest technologies like cloud computing, service providers will offer more outcome-based pricing rather than simply equating more FTEs (full-time equivalents) with more work. Customers are looking at fully managed services or variations of managed services with outcome-based service level agreements.
Moving towards Managed Services
Both buyers and suppliers are showing interest in managed services. While the right application of this model shows multiple benefits, challenges can include setup complexity, volume uncertainty, impact on different IT functions and organizational change requirements. Buyers must also contend with the risks inherent in the move to managed services, such as a potential cost escalation in situations where volume is uncertain and demand trends unknown.
Supporting Empowered Employees
A recent poll suggests that 36 percent employees prefer to bring their own PCs to work. This trend is only expected to grow, encompassing smartphones and other devices too. Increasingly, organizations will provide a ‘digital allowance’-a subsidy that enables participating employees to purchase their own productivity devices for business use. Outsourcing partners will need to manage the allowances and support different types of devices.
Much more than service
Traditionally, service providers have been responsible for efficiency and cost reduction. Increasingly, clients are asking their providers to also identify inefficiencies within the client organization’s internal environment that contribute to high costs, and how those inefficiencies can be addressed. Service providers are being given more leeway to find savings and improvement opportunities within the client operation.
Redoing the Contract
Restructuring, in which clients renewed, renegotiated or expanded existing contracts, is the order of the day. The trend indicates that with more contracts coming up for renewal, restructuring will continue to play an important role with clients demanding more than ever.
Best suited breed
Outsourcing clients are leaving the bulk of their original scope with incumbent service providers. Increasingly, though, they are splitting up portions of the original scope and awarding it to other service providers in a best-of-breed approach. This is especially true in large IT outsourcing restructurings, specifically in the applications, desktop and network services areas. Incumbents working under renegotiated agreements may have to share clients with competitors.
Cloud computing seems to be the order of the day. While there is a lot of discussion and hype around cloud computing, there is more planning for potential cloud computing opportunities rather than actual cloud computing execution built into contracts right now.
Beyond Labor Arbitrage
With labor arbitrage fully mature, companies are seeking different solutions. In the applications outsourcing (AO) market, providers are experimenting with new models including risk-shared partnerships and industry-specific AO solutions. In infrastructure outsourcing (IO), it’s leading to a ‘crisis of genre’ for offshore suppliers. As they mature and reach a critical size, they begin going after the same clients as multinational suppliers. This forces them to shift to traditional rules of IO, deviating from the innovations they brought to the IO marketplace.
So these were the 10 outsourcing trends that you must watch out for while negotiating outsourcing deals. If you are looking for a reliable outsourcing partner, contact iSN Global Solutions. The company has been rated as one of the best outsourcing partner providing an array of services for more than a decade.