Innovative outsourcing models fail to take off

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Innovative outsourcing models fail to take off

Cliff Saran
New models of delivering outsourced services touted by major service providers are still more hype than reality, according to research from Forrester.

In a study of 51 European contracts, the analyst company said few offered strong evidence of new patterns of outsourcing.

Few contracts were based on the so-called "transformational" approach, which bundles consulting, process redesign, applications work and managed services. Forrester said most of the outsourcing contracts it looked at used conventional charging structures, not utility or pay-as-you-go models.

In particular, it said, "Despite spin about pay as you go, profit sharing or other interesting pricing models, Forrester observed that most IT services and business process outsourcing suppliers sign up clients more readily on a simple, subscription-based contract."

With some agreements, said Forrester, a small percentage of the total value of the deal was dependent on bonus and penalty clauses. "To progress beyond this situation, end-user firms will need to see suppliers taking a real stake in business risk."

One example of shared risk was the recent Computer Sciences Corporation contract with insurer Swiss Re, where the outsourcer was involved in selecting Swiss Re's closed book life assurance acquisition targets.

The study also found that, in spite of the hype surrounding offshore deals, offshore outsourcing remained a rather small element in recent outsourcing activity.

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