March 8, 2002 — (WEB HOST INDUSTRY REVIEW) — A recently-released Yankee Group (yankeegroup.com) report by
r
Carrie Lewis heralded the rebound of “mega outsourcing” and outlined its
r
impact on the market.
r
r
As an example, the report outlined IBM Global Services’ recent signing of a
r
seven-year, $4 billion scalable outsourcing contract with American Express,
r
one of the biggest IT users U.S, with over 1 billion transactions a day for
r
credit card and travel companies. IBM will operate Amex’s data centers, host
r
its website, and provide help desk support.
r
r
“Mega outsourcing deals are on the rebound, but their structure is changing
r
radically,” said the report. “First-tier players such as Accenture, IBM, and
r
EDS have all announced mega contracts since the start of this year.”
r
r
These contacts tend to be shorter in duration, as much as 50 percent
r
shorter, running three to seven years with annual reassessment procedures,
r
as opposed to 10 to 15 years. Involved parties do not want to get locked
r
into deals that become quickly obsolete as technological innovations make
r
the contract metrics irrelevant.
r
r
Contracts are also more flexible both in the scope and volume of services.
r
Traditional contracts usually cover wide areas of a user’s data environment,
r
but tightly controlled breadth of services delivered within that
r
environment. Today, outsourcers are allowing users the opportunity to
r
consume as many services as desired, using the utility computing or
r
pay-as-you-go model.
r
r
Pricing is also becoming more variable, with fixed monthly charges
r
(calculated from peak computing demands) being replaced by variable monthly
r
charges based on actual consumption rates. “The dynamic allocation and
r
reallocation of resources in line with business changes is the next
r
innovation in outsourcing,” Lewis wrote.
r
r
Although IT cost savings is still the main driver of current mega
r
outsourcing deals, but flexibility of contracts and pricing has become the
r
secondary driver. Lewis predicted that the coexistence of cost savings and
r
flexibility will soon become the standard in outsourcing.
r
r
“Business and IT strategy alignment has become a critical end-user
r
priority,” said the report. “Dynamic, self-provisioning technologies that
r
enable end users to retain strategic control over their outsourced IT
r
infrastructure and business will increasingly be demanded. Vendors with
r
these capabilities are the ones that will win tomorrow’s outsourcing deals.”
