Mid-sized businesses are the big outsourcers today, but will they repeat the mistakes of the pioneers?

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I interviewed a partner at US firm ISG yesterday. ISG is the company that owns sourcing broker TPI and IT benchmarker Compass Management Consultancy.

As a result it has a great view of the global IT outsourcing sector and I did a short story on my interview with ISG partner Deborah Card yesterday.

ISG has found that the fastest growing part of the Forbes G2000 group of businesses , in terms of IT outsourcing and BPO, is the companies that are mid sized.

There has been a 124% increase over the past five years in the number of business process and IT outsourcing contracts with a value of between $10m and $25m, signed by midsized companies. This compared with a 72% increase in the number of contracts worth over $25m during the same period, signed by big companies.

ISG also said only between 25% and 30% of the mid-sized companies outsourced before 2008. Now they are attracted by standardisation through cloud services because they do not want to have to complete major customisation. As a result Infrastructure as a Service (IaaS), Software as a Service (SaaS) and Business Process as a Service (BPaaS) are outsourcing services with significant take-up.

One of the interesting points made was that many of the companies that are new to outsourcing continue to make the costly mistakes that companies made in the past.

Here is some advice from ISG for mid-sized companies embarking on an outsourcing projects.

-Do not think that once something is outsourced it is no longer your problem
-Ensure you plan for change management and governance
-Having clear expectations of the supplier and service.
-Mid tier businesses should look at solutions from a wide range of suppliers rather than the large system integrators. Try and be a big customer for the supplier rather than a small fish in a big pond
-Look at niche suppliers

In such a mature sector you would think lessons would have been learnt. Mind you there are lots of successful sourcing consultants out there so there must be demand.

I am sure there are many more mistakes being made in outsourcing.
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About this Entry

This page contains a single entry by Karl Flinders published on September 26, 2012 10:34 AM.

IT outsourcing marriages sometimes require changes from both partners was the previous entry in this blog.

Are SME IT suppliers credible bidders against system integrators in public sector? is the next entry in this blog.

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