Your Existing Outsourcing Deal

As your enterprise already have outsourcing deal and with changed economic condition it seems that value delivered by deal is not sufficient. So what you can do with existing deal:

1. Encourage Service Provider to cut cost: Cost cutting always has scope. Ask your service provider to provide information where your enterprise can cut costs as service provider has third party view as well inside information about lot of your processes and systems.
2. Encourage Service Provider to optimize standardization and process maturity: As service provider might be working with its numerous customers. Get benefit of this knowledge and ask service provider to suggest standardization and industry practices.
3. Increase Scope and duration of your deal: This will encourage service provider in cost cutting and increasing the productivity. It will also reduce your management overheads.
4. Verify Service Provider’s Performance: Benchmark service provider’s service performance from industry standards as well as service provider’s other customers.
5. Renegotiate: If possible renegotiate the deal with better terms and conditions.

Off shoring Pricing Models

1.Time and Material: In this model outsourcing enterprise pays for the number of hours put in by Service provider. This model is very popular among Service provider because of its minimal risk. This pricing model is successful in the scenario where requirements are evolving and work involves lot of thinking.
2.Fixed Pricing: In this model Service Provider is paid a fixed amount for a fixed amount of work. In this model Service Provider assumes larger risk because of inaccurate estimation of work.
3. Outcome Based Pricing: In this pricing model relationship of outsourcer and service provider morphed into collaborative business entities where outcome of project decides fate not only of outsourcer but also of service provider. In this model service provider has highest level of engagement with outsourcer. In this model service provider assumes highest risk. This type of engagements are form of consulting where consulting starts much earlier and service providers understands outsourcers business in depth.

Outsourcing and Cloud Computing

Outsourcing: Big corporates took lead and done it first
Cloud Computing: Startups and SME and leading the bandwagon

Outsourcing: Banking, Finance, Insurance, Cxxxx were early movers
Cloud Computing: Technology sector is leading

Outsourcing: Non core applications were early targets
Cloud Computing: Non core applications and once off computational needs are prime targets

Outsourcing: Cost cutting was prime mover
Cloud Computing: Cost cutting is prime mover

Outsourcing: As cost differential is shrinking but still out sourcing is growing because of core competency argument
Cloud Computing: Focus is on Cost cutting

Outsourcing: Concerns - Security, Privacy, SLA definition & follow-up, Compliance and change in thinking
Cloud Computing: Concerns - Security, Privacy, Availability, control over IT assets, Audit-ability, SLA definition & follow-up, Compliance, different style of application & infrastructure architecture, Software licenses, Vendor lock-in and most important is Change in thinking

Outsourcing: Morphed into Off-Shoring and Near-Shoring
Cloud Computing: Still evolving

Outsourcing: Technique is mastered
Cloud Computing: Still evolving

Outsourcing: Follow the Sun
Cloud Computing: Present: None, Future: May be follow the Moon