IT Outsourcing is a growing trend. However, the general picture is not the brightest when it comes to the relation between vendors and their customers. Dissatisfaction among outsourced customers is quite common.

Could this situation be turned into a business opportunity for outsourcers? I believe it could

In this blog I will offer my view of the issue, its cause, and a few suggestions about how to turn the current chasm into a business opportunity.

Outsourced companies are increasingly aware of the need to look over the shoulders of their outsourcers to ensure that capacity consumption and billing are as fair and low as possible – without compromising operational stability and performance. As SMT Data’s CTO Steven Thomas writes in his blog : ”outsourcing the work is not the same as outsourcing the responsibility” and it is undoubtedly very important for outsourced companies to have a clear understanding of what drives their costs and how they can run their business effectively.

Input from outsourcers across Europe shows that outsourcers are experiencing an overwhelming focus from their customers on operations and low cost per operating unit, which results in pressure on prices and a threat to their business model. In our view, this unfortunate situation derives from a fundamental mistrust, arising from lack of transparency. The tension between the two parties could easily be reduced or eliminated if both would focus on sharing facts, and on this base look for mutually beneficial business improvements.

It is only by creating broad transparency that the actual business value of IT can be clarified

This is in the interest of both the outsourcer and its customers.
Having dissatisfied customers is not a sustainable situation and ends up being very expensive for both outsourcers and their customers.
Fortunately, it seems like there is a shift in the market, which is visible among others in the development of hybrid business models such as vested outsourcing.

These are the elements that I believe would contribute to securing a better relation and collaboration between outsourcers and their customers:

• Helping customers understand the link between technical billing models and the business-related cost drivers
• Creating services in top of the delivery of outsourced infrastructure that can help customers optimizing the use of their resources by, for example, totally or partially migrating applications to different platforms
• Helping the customers’ internal or external developers with optimizing codes for production (dev/ops transparency)
• Delivering daily automated reporting on capacity performance and cost
• Proactively controlling costs with the creation of early warnings
• Aligning the outsourcers’ costs with their customers’ use of the outsourcers’ capacity

With the increasing importance of IT, tomorrow’s outsourcers will have to have a much more integrated role in relation to their customers. Only by removing the chasm between the two parties by introducing a new business model with new services and focus on improving customer satisfaction, will this result be achieved. In companies that run their own IT, there is an ever-increasing integration between IT and business. A similar integration should an important goal in the outsource’s business model.

Contact us if you are interested in hearing more about how SMT Data can help you improve transparency in an outsourced environment and keep yourself updated on our activities by following our Linkedin side.

by Nils Kierkegaard, CEO

Nils Kierkegaard, CEO

Nils Kierkegaard has been part of SMT Data’s management since 2009. Nils has more than 30 years of experience from executive positions within the IT industry.