Business customers are demanding more from their IT service providers, as IT departments come under increasing pressure to deliver results from sourcing investments, a leading analyst has said.
Speaking at Forrester’s Services and Sourcing Forum in Nice, Stephanie Moore, VP at Forrester Research, said “price sensitivity” towards IT investments had become more acute each year since the dotcom boom, leaving IT leaders under pressure to prove tangible benefits from sourcing, and chief executives increasingly under pressure from shareholders.
“Clients want to know exactly what they are paying for, and how services are priced and delivered. They also want more consistent delivery, quality, flexibility and the potential to optimise parts of what is delivered,” she said.
“And clients want stability and reliability in the context of a fluctuating global economy.”
Moore said that service providers were acting fast to standardise processes to improve delivery speed, and many were investing to retain staff in the fast moving Indian IT services market, which still have lower costs than other markets despite inflationary pressures and a vast skills base.
But she also pointed out that there was a concern that some businesses were not sure what they wanted from IT services providers – or else failed to make their needs clear at the time of negotiations and contract writing.
This issue has been under scrutiny in recent weeks as IT services giant EDS has been defending itself in court against a £709m lawsuit from broadcaster BSkyB which has alleged that the US services firm exaggerated its abilities when pitching for a CRM contract back in 2000. EDS maintains that Sky “did not know what it wanted” for the contract, and was unable to do anything else except meet the changing targets as the project went along.
Moore cited one example of a large pharmaceutical company she had advised about its outsourcing agreements because it had been sending back 60% of software code to its Indian outsourcer to be rewritten due to it not being properly specified in the first place.
“Companies have to figure out what they want, and to what level they want it delivered. They need to write better contracts with well balanced service level agreements,” she argued. “It’s a question of organisational culture - firms need to have good change management, and the right governance to monitor what their vendors are achieving.”