5 Trends In Outsourcing That CIOs Need To Know About

by drjim on January 28, 2015

Outsourcing rules are changing and you need to be aware of these changes

Outsourcing rules are changing and you need to be aware of these changes
Image Credit: Mark Hillary

Back in the golden days of outsourcing, CIOs could just pick up the phone, get in contact with the head of their outsourcing contractor in India or China, and scale their team up or down as conditions required. However, times have changed and now that everyone is starting to understand the importance of information technology, the world of outsourcing is getting more complicated. CIOs have to understand the changes that are occurring and need to adapt.

5 Trends That Are Reshaping How Outsourcing Is Done

The world is changing and how the person with the CIO job does outsourcing is changing also. However, the ways that outsourcing are changing can often be hidden from a casual look at the industry. If you want to know what is really going on, you need to be willing to take the time to dive in deeper and do some investigating. Good news, I’ve done this for you. Here are 5 trends that are currently sweeping through the outsourcing industry that we CIOs have come to rely on.

  • Deals Are Getting Smaller: One upon a time you could hardly pick up a business newspaper without reading about some mega-outsourcing deal being announced. Well, it turns out that those days are now behind us. For the past 10 years or so, the size of outsourcing deals has been declining. Today, there are roughly 3x as many deals that are worth less than 100M than there are deals that are greater than this.
  • New Ways Of Doing Pricing: The good news for CIOs is that outsourcers are fiercely competing with each other. This means that they are all open to new and innovative ways to price outsourcing deals. This can include such things as business-outcome pricing, joint ventures, and revenue sharing deals.
  • Going Multi-Source: More and more CIOs are not allowing themselves to be tied to a single outsourcing vendor. Instead, they are spreading the work out among multiple vendors. This does introduce the complexity of managing multiple vendors who may all be working on the same project. However, so far CIOs seem to be indicating that the additional complexity is worth the reduced risk.
  • It’s All About Security: Every CIO realizes that when an outsourcer is invited to work with the company, there is the additional possibility of a security breech that needs to be considered. Adding security restrictions to the outsourcing contract is something that has started to take up more and more time when these contracts are being negotiated.
  • Cloudsourcing: Just as the arrival of the cloud has impacted how business is being done, so too has it had an impact on how outsourcing is being performed. In this model the outsourcer takes over a function of the IT shop and provides its services via a cloud-based infrastructure. The rest of the company doesn’t even have to know that this function is no longer being provided by IT department staff.

What All Of This Means For You

It goes without saying that the world that we live in is always changing. Based on this understanding, I suppose that the person in the CIO position really should not be all that surprised that the world of outsourcing is also changing.

The types of deals that are being signed in the world of outsourcing have become smaller, they use new pricing models, multiple vendors are being used, security has become even more important, and cloudsourcing has become part of the equation.

The shake out of all of these changes is that the outsourcing decisions that a CIO has to make have become even more complicated. The good news is that the new flexibility that is available in outsourcing deals means that CIOs have a better chance of crafting deals that will best fit their customer’s needs. Take the time to study the changes that are sweeping though the world of outsourcing and use these changes to reach better deals with your vendors.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills™

Question For You: Do you think that the changes in the world of outsourcing make outsourcing more or less attractive?

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What We’ll Be Talking About Next Time

As the person with the CIO job, because of the importance of information technology your company expects a great deal from you. However, if you have not managed to gather the power and the credibility that you are going to need in order to successfully accomplish your job, then it’s going to be very hard for you to accomplish what you need to get done. What this means is that you need to discover how to boost both your power and your credibility…

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