Business drives outsourcing market towards gain-sharing

Indian IT outsourcing firm HCL Technologies says businesses are increasingly seeking to get more value out of outsourcing deals by opting to share share profits resulting from the relationship.

Indian IT outsourcing firm HCL Technologies says businesses are increasingly seeking to get more value out of outsourcing deals by opting to share share profits resulting from the relationship.

"Punitive measures in traditional outsourcing are aimed at ensuring service-level agreements (SLAs) are met, but this new approach is designed to encourage outsourcing companies to exceed SLAs in return for outcome-based rewards over and above the basic fee," said Rajeev Sawhney, HCL European president.

Although this is true of the market in general, Sawhney said the rapid adoption rate of outsourcing meant a larger proportion of companies in the UK are following the trend. The UK accounts for 29% of HCL's business, up from just 5% five years ago.

He said the UK had initially lagged behind the US when it came to outsourcing, but ascribed the change to the UK's move from an economy based on manufacturing to one based on services, which have IT at their core.

"The role IT plays in service industries like banking and insurance is significant because it is closer to the business and relates directly to the bottom line with greater impact than in manufacturing," he said.

According to Sawhney, the trend towards outcome based rewards is a natural consequence of an increasing number of CIOs coming from the business and having greater influence over how the business is run.

"Customers are no longer interested in IT for its own sake, but are asking instead how IT can help business achieve profitability goals. The divide between business and IT is disappearing and companies are no longer cautious about IT outsourcing and managed services, but instead can see the business value," he said.

HCL is confident the outsourcing market will continue to grow and has recently announced a 42% increase in annual revenues. Sawhney said a ready supply of technically qualified English speaking IT staff from India means the accelerated growth of outsourcing will be maintained for the next five to ten years.

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