Business and Procurement Leaders Take a More Active Role in Outsourcing

While cloud computing helps companies scale their services up or down, as needed, without making big capital expenditures, it also poses new management and integration challenges. In an …

While cloud computing helps companies scale their services up or down, as needed, without making big capital expenditures, it also poses new management and integration challenges. In an age when you can “literally get the cloud over your iPhone,” companies want to “rein in the wild, wild West of organizations buying their own cloud services” to regain control over their cloud deployments, said David Tapper, program vice president of IDC’s Outsourcing Services research team.

This could translate into an opportunity for outsourcing companies with the ability to oversee a disparate collection of cloud services and providers for their customers. Not surprisingly, Tapper said, major outsourcing companies are investing in cloud integration and management platforms that help them do just that.

“This is not vaporware,” he said. “It’s happening. Buyers are using this to see if they can get control and integration transparency of all their providers.”

A Few Good Suppliers

This trend is further bolstered by buyers’ desire to reduce their numbers of outsourcing suppliers. According to IDC research, 55 percent of companies prefer to buy bundles of services from providers vs. discrete services.  For companies with 5,000 to 9,999 employees, that number is a whopping 74 percent.

A small but significant 12 percent of companies would like to work with a single provider for all of their services. Because of this, companies will increasingly look for providers that can provide end-to-end services and advanced management capabilities.

IDC also found that about 80 percent of companies prefer to look at no more than five suppliers when putting deals out to bid. This is true for both traditional outsourced services and cloud services. The numbers are also roughly the same for services currently being outsourced and for those that might be outsourced in the future.

New Breed of Buyer

In addition, Tapper said, business leaders are taking a more active role in procuring services – especially cloud services. According to IDC research, 56 percent of the primary buyers of cloud services are C-level executives, most often CTOs or CIOs , followed by IT organizations at 38 percent. By 2017, however, IDC expects the number of C-level execs buying cloud services to grow to 71 percent.

The shift is less dramatic for traditional outsourced services, with C-level execs acting as the primary buyer about 70 percent of the time. However, Tapper noted, the share of chief marketing officers leading procurement decisions will increase from the current 3 percent to 6 percent by 2017, while the number of chief procurement officers making such decisions will nearly double from 4 percent to 7 percent during the same time frame.

“Collectively that’s 13 percent over the next five years, so that’s a big number,” he said.

Information Services Group also mentioned the growing role of business units in outsourcing decisions during its recap of outsourcing activity for the first half of 2013. “Business leaders have entered the mix well and truly,” said John Keppel, ISG president and partner. “That is not to say that the CIO is not a significant buyer, but these new buyers have more influence now than before the recession.”

Ultimately, Tapper said, no matter who makes buying decisions, how many suppliers are involved, or whether companies are buying traditional outsourced services or cloud, quality of service is what matters most to companies. “From a customer’s point of view, it’s always about risk and quality of service,” he said.

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This story first appeared is sister publication, Global Delivery Report. 

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