When I first came into this industry, the whisper was "this outsourcing gig is going to go away fast because the cost arbitrage model is not going to last...." and so forth.
I must say it has lasted over 20 years now. And I think it has passed the test of time.
Over the last 2 recessions in the US and the whole world, this idea of cost arbitrage has segued into "delivering value to the client". Cost and labor arbitrages are now almost taken for granted, and such methodologies as "Cost-out toolkit for the CIO", "18 Ways To Reduce Cost Mr. CIO" and such, are basic.
Today companies are looking to not only reduce their IT ASM costs, IT infrastructure maintenance costs, but they are asking for additional business values that help them in their businesses. "Is partnering with your company going to help me boost my revenues / bookings?" - is the main question being asked by CIOs and business leaders.
With this background, let us look at the current scenario.
- HP bought EDS.
- Dell bought Perot Systems.
- Xerox bought ACS.
I would like to look at these events as opportunities for us.
Here is why.
All these organizations had their own IT infrastructure, applications, processes etc before the merger. Dell has one of the most effective ERP systems that tracks an order from the client through all the component manufacturers and finally gives a status update to the customer. HP and Xerox had their own IT systems supporting their business processes with their apps and infrastructure before the mergers.
With these mergers, these IT systems would have to be optimized for the combined organization in order for them to operate their businesses the way they want to. This calls for the following activities, which are opportunities by themselves:
- Optimization of their IT infrastructure
- Optimization / re-writing their applications
- Alignment of their IT processes to the combined organizations' business processes
- Implementing SOA frameworks
The obvious question that begs to be asked here is - why would Dell ask anybody outside of Perot Systems to do these alignment exercise? Or, Xerox to ask anybody outside ACS? The point is not Dell or Xerox being business prospects. These are examples to show what lies ahead os us in our life's journey. The point is that of what we should stand for in the market. We should stand for an organization that has done and truly believes in Transformational Outsourcing. IT services organizations that are capable of addressing this business need will reap huge benefits going forward, not only in terms of their revenues, but also in terms of gaining the maturity and the status of being a truly world class player and a force to reckon with in the market.
The next question therefore is, how do we get to know such deals before it is announced to the world. Chances are we won't. Or we can't. The point is that of market positioning / taking a stance in the market about what your forward looking direction is going to be. Are we going to stay in the ASM/ADM/Infra stuff and keep pushing the envelope for cost arbitrage, thereby spoiling the whole market? Or are we going to transform ourselves to do something different leveraging our ASM/ADM/Infra skills? That is the point. That is going to really add value to the business' bottom lines. That is what the business leaders and the Corporate CIOs are asking - Why should we partner with you? They are not looking for cost savings through labor arbitrage. They are looking for real value add to their businesses. Let us stay tuned in to see who moves the cheese here!
Are we able to deliver the goods to them?
