Multinational and large companies have their own IT departments due to the big role that IT plays in their business processes. However, IT has permeated our daily lives, from our personal finances to our utility bills. Any important transaction now is recorded beyond mere paper documents - a financial account has a hard copy and a “soft” copy.
In such context, small and mid-sized businesses need IT support more than ever. However, SMBs do not have the budget to spend on an IT department. Thus, many SMBs have turned to outsource their IT needs to a service provider.
Finding the right IT service provider is also akin to finding the right employee - there is a need to thoroughly screen service providers to get the most out of an outsourcing relationship. In an interview with InformationWeek, TeamLogic IT Vice-president for IT Vince Plaza named four questions that SMBs can ask of prospective IT service providers.
What makes you better than other service providers? Being shy of asking the right questions will not give you the best outsourcing deal. It’s also a way to test a provider - providers which know their services well will take advantage of this opportunity to showcase their company.
What will you do to help my business keep pace with the competition? As the global marketplace gets smaller, companies are also becoming more competitive among themselves. Will the service provider be able to enable your company to keep pace with modern technologies?
What will you do to give my business a fast ROI? An IT service provider should provide more than the hardware and software, says Plaza. Quality service providers enable business owners to understand how their investment in technology will help their ROI rate accelerate.
Who will provide support when my business needs help? Working with a service provider means you also have to know how they work. Who provides support when problems crop up? How fast do they act on a problem? Does the person have the right credentials to help you solve an issue?
These are just general questions for a prospective outsourced IT deal - your business will provide you with more specific questions, such as the number of your IT equipment, the scope of work that needs attention, software deployment, among others. Location and vendor partnerships are also major influences in choosing an IT service provider, although most service providers can provide support to major technologies, i.e. from Apple, Google, and Microsoft.
Now that we are treading the last days of 2011, the year when the IT outsourcing industry saw smaller deals, customers were doubtful of the process, and cloud computing was talked about a lot, it is believed that 2011 developments might resonate throughout 2012. However, economic issues will still take its toll on the entire sector.
At CIO.com, Stephanie Overby listed down 12 IT outsourcing trends that may be seen next year, according to industry experts:
1) International firms are set to look for other locations besides India.
Phil Fersht, founder of outsourcing analyst firm HfS Research, said India will see slower growth. Cost efficiency will no longer be the main reason international companies outsource offshore. They will now consider expanding their skills and knowledge in back-support and other processes by tapping into countries like Brazil, Malaysia, Mexico, South Africa, Romania, and Bulgaria.
2) Expect sterner IT security.
Mark Ruckman, outsourcing consultant at Sanda Partners, predicts “2012 will be the year of security”. He believes that sooner or later, one of the numerous IT service providers worldwide will experience an embarrassing security breach, which is why he thinks outsourcing firms will definitely find better ways to protect their client’s data.
3) Application development will likely be sourced from the US.
Financial service firms have long sourced fragments of their codes from offshore providers, but will realize that it is actually more affordable to do so by establishing captive centers or acquiring the services of third party providers in secondary US cities.
4) IT outsourcers will try different things.
Everest Group believes IT service providers, specifically the ones offshore, will find new and innovative ways to counter the pressure brought about by pricing issues to reinforce growth and profitability.
5) Failure to put backsourcing words into action.
Steve Martin from Pace Harmon predicts companies that are fed up with procuring IT services offshore will make impulsive decisions to the point of scheming a plan to bring back work in-house, only to realize that it’s too much for them.
6) IT Outsourcing clients might axe account managers.
Phil Fersht of HfS Research believes account managers of IT service providers should not focus on sales to the point that the core requirements are brushed aside. There is a need for account managers to think about not just the revenues but building relationships as well.
7) Opportunities in Infrastructure building.
Offshore IT providers are set to expand their service offerings by trying their hand at infrastructure building. They have actually been working on developing the process and honing it to move past application development and maintenance work.
8) It’s time for small players to shine.
Outsourcing providers will try to bank on smaller enterprises as they have exhausted their leads from the Fortune 1000 pool.
9) IT vendors will remain fixated on labor arbitrage.
Outsourcing buyers will be looking for more factors other than low costs before signing deals. Service providers, on the other hand, will still focus on keeping costs low.
10) The cloud will be more defined.
The hype around the cloud will definitely mellow down as IT providers shift their focus on improving the service by calculating the risks and providing the service in areas where clients need it most. Stricter regulations for the cloud will also be implemented by 2012.
11) Outsourcing buyers will be on guard for another recession.
The decisions for improvements and expansions by outsourcing buyers will most likely be put off until they are confident enough in the economic situation. Most of them will see large contracts as a business solution that entails a lot of risks, said Everest Group, and added that there may be slow activity during the first half of 2012. However, there’s a great chance that it’ll gain stride in the following months.
12) 2012 will be made up of M&A combos.
Fersht of Hfs Research said providers will avoid large mergers due to scarcity of the business model that they actually need and want. One example is a flexible structure that can accommodate expansions and reductions.
In the US, Fersht sees large providers that have merged are making use of cloud-based tools. According to Ruckman, there’s also a possibility that three mid-sized companies will merge and make up a large IT service provider.
IT service providers continuously engage in innovation especially when it comes to product and service development. Their sales techniques, however, come as an exception. Buyers observed that they have been using the same methods since time immemorial and these tricks only bring about frustration rather than an actual sale. Based on consumer and market feedback, Stephanie Overby of CIO.com produced a list of the least effective sales techniques employed by IT service providers.
Can you hear me now?
Service providers miss out on understanding their customers’ specific needs because their perspective is based solely on standard set delivery models. Outsourcing companies are found to propose packages that suit their own business needs and furthermore compromise customer requirements just so it fits a solution that’s convenient for them.
Alternative: Sincerely listen to every customer’s requirements before carrying on with the usual spiel. Afterwards, present only service offerings relevant to their needs.
A little knowledge is a dangerous thing.
A typical salesperson starts any endeavor with an adequate amount of research. Then they start a meeting with highlights on net profit ratios and effects on EBITDA. While these technicalities are useful to mention, they are not effective to spearhead a sales pitch.
Alternative: Tone down the sales and use real subject matter topics that are worth your clients’ time.
Death by a thousand slides.
With the usual sales call’s long and dragging PowerPoint presentations, you’re bound to think the number of slides impact commission. This is not at all helpful in pursuing a deal.
Alternative: Engross your clients in an actual conversation. Talk to them, hear out their needs and concerns, and address their questions. You will easily be handpicked among a sea of PowerPoint slides flashed by competitors.
The old bait and switch.
Providers create an illusion of high service delivery by bringing in a VIP in a meeting with a client. They say a big shot will be dedicated to your project when the truth is, same top performers are also being promised to other clients and you’ll never see those VIPs again.
Alternative: Take in an actual client. Fly in a customer and treat him/her to a nice stay at a resort nearby. Bring your customer in the meeting and allow the prospect to ask questions.
I’m the XXX Expert.
Introducing people with varying titles to reflect industry expertise is a marketing strategy that clients can detect. Most of the time, the same pool of people is utilized to service all existing clients.
Alternative: Work on becoming an industry expert and ask your clients valuable questions that can lead to crafting effective and customized solutions.
A deal until the lawyers arrive.
There exist providers who start with fair and mutually benefiting agreements that are eventually overhauled with new terms and clauses by a legal department. Customers find a gap between what has been agreed upon to what they are being made to sign.
Alternative: Define terms and develop negotiating options with your lawyers. It also helps to revisit your business objectives to be reminded of what you can and ought to provide customers.
The last-minute price drop.
Outsourcing deals are crafted to deliver at least 20 to 30 percent profit margin. This gives providers leeway for a price drop. Then again, when a significant discount is suddenly offered to a customer, it can rouse apprehension among buyers. It’s either their provider was initially trying to extort more money out of them, or the discount will lead to lower profit and equally lower service quality.
Alternative: There is no need for surprises. It’s far more assuring to customers if providers remain transparent with pricing all throughout the deal.
Burying the lead.
Salespeople are fond of the slow buildup before they get to an actual selling proposition. Customers want a solution that’s straight to the point, a proposal that will clearly reduce costs and improve efficiency in their practice.
Alternative: In your next presentation, open with the grand finale. Start with the supposed final spiel, your value proposition in summary.
The never-ending check-ins.
Consistent follow-up calls can be annoying. Customers find it irritating and unproductive.
Alternative: Stop being a bother after checking in with the prospect thrice. Stop calling or sending messages. They will reach out to you when they need you.
A typical sales lead will exhaust efforts in convincing internal management that a new prospect has potential and can be a good deal. More time and resources are spent selling internally rather than making a pitch to the client.
Alternative: Focus more time and resources on understanding a client’s needs.
by: Karen Cayamanda
Tuesday, December 13, 2011 | Comments (0)
Category: Outsourcing Research / Trends
A lot of companies in various industries have turned to information technology (IT) outsourcing to utilize resources of third party providers so they can focus more on their core competencies and to improve productivity. In fact, it has become one of the greatest financial and quality reinforcements for any operation to date. Some of the most commonly outsourced IT functions are systems administration and networking engineering, and it’s been proven that outsourcing has a positive impact to the entire business operation.
IT providers worldwide now have more options which are beneficial to clients, their customers, and service providers themselves.
Since the IT industry never ceases to develop, value added resellers (VARs) have come up with different ways for more sales opportunities by expanding their service offerings. For example, businesses nowadays can outsource IT professionals - this saves them time and money in training yet provides their customers the same experience with local employees. VARs can also take advantage of the sudden growth of the market by providing outsourcing infrastructure models.
However, in most cases, companies that choose to outsource tend to overlook the actual quality of the candidates presented to them by the service providers because they are too absorbed on the low rates.
Astreya Partners’ Jim Illson recently shared with CRN.com common mistakes companies make when looking for the right outsourced IT personnel:
Not hiring locally
Skipping out on local talent while establishing an office offshore may put any operation at risk. Why? Having a new branch in a different location may well be a fish out of water. If the outsourced employees don’t have a clue on what’s going on around them, chances are they will have a hard time understanding their market.
Forgetting to evaluate the employees
Almost all industries use performance metrics as a gauge to see how effective the talent is for the process. Clients should also be able to participate in such evaluation so they can personally see if they are actually maximizing their funds and both parties are following the service level agreements (SLAs). Evaluations also enable clients to point out which area the service provider should improve more on or just give them a pat on the back for a job well done.
Presenting candidates randomly and hope they can get away with it
A proper screening process can save time and money for the service provider and the client. Some candidates may look as if they are perfect for the job yet they lack a specific skill or the personality doesn’t actually match the position. These are also things that firms should look into before presenting a candidate to a client. Companies that give out exams and perform intense screening processes should have a standardized format so in the end, clients will get only the best.
The freelance and exclusive dilemma
Companies should measure the capability of candidates before signing them off for a project. For example, do you assign a long-term project to an exclusive employee or to a contractual one? Firms should always keep in mind that once a candidate is chosen by the client, they will become a representative of the VAR, so the candidate’s failure or success will definitely reflect on the VAR.
Not all IT processes and candidates are the same.
Just because a candidate knows the basics of IT management doesn’t mean he/she can resolve IT infrastructure issues. The talent should also be able to ride the tides with the client as they expand, and not get stuck on the basic process which he/she was hired for. Providers and resellers should likewise be flexible enough in measuring and providing evaluating systems for clients.
To acquire vital equipment or to manage consumables in a company, an executive or an employee has to coordinate with the procurement department. As the business unit most responsible in managing company expenditures with respect to operating resources, the procurement department is as essential as the human resources, the finance, and the operations departments.
The following qualities have been identified by outsourcing consultancy firm TPI to make a company’s procurement department more responsive in providing services to other business units:
Strength in leadership. Leadership skills should make the procurement manager stand out of the department. The department head will need to rely on experience as a stepping stone in achieving company goals. A strong leader facilitates change in the department, enabling employees towards a service-focused strategy for other business units.
Goal-driven organization. For progress to occur within the organization, a clear direction for the organization must be set. Objectives serve as directions that the procurement department can take. These objectives must be understood well among the employees for the department to take the path towards progress.
Support from the top. Including the procurement department in executive meetings and planning conferences emphasizes their significance to the whole company. This show of support gives the procurement department a sense of pride and importance to the business operation.
Empowerment. Providing the procurement department with autonomy enables them to quickly respond and interact with other business units. Less time bogged down in bureaucracy and more time used in providing services result to an efficient company. Autonomy, however, relies on teamwork, and teamwork is made possible with a clear set of goals and responsibilities among employees.
Maintaining integrity. Consistency in providing quality services is a hallmark in achieving integrity and a good reputation. With a good reputation, a procurement department becomes a valuable partner among business units.
A more responsive and dynamic procurement department brings more than departmental change. This will definitely spread to other business units, as the procurement department’s interactions with them rise. Eventually, there will be a need to evaluate this growth and make the procurement department a better business unit.