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Complexity deepens in next generation deals: sourcing strategya new minefield

Australian companies are moving towards more complex Sourcing deals that no longer rely primarily on one supplier, according to Gartner analysts Craig Baty and Jim Longwood.
Local IT departments are choosing multi-supplier strategies, says Research Director Jim Longwood, co-chair of next weeks Gartner (NYSE: IT and ITB) summit, "Outsourcing The Next Generation", at Darling Harbour, Sydney, on July 29-30.
"Companies no longer see one vendor as capable of doing everything," he says. "Evidence for this trend is becoming increasingly compelling. A lot of re-tendering is under way now, especially in government. This is the logical end to the first generation of Sourcing deals and a new way of operating is emerging. To make it more challenging, CFOs are demanding their CIOs to include business process outsourcing in their sourcing strategies"
Group Vice-President of Research, Craig Baty, says CIOs of large companies are embracing four basic routes for their Sourcing strategy:
In-house management and development, some times taking work back from an outsourcer
Selectively Outsourcing both core and niche tasks, such as data centre operations and Web Services
Going offshore, looking at options across Asia, primarily India but also China, The Philippines and even Vietnam; and
Offshore in-sourcing, in which a company sets up its own dedicated development team, often in India
"These are the cornerstones of next-generation Sourcing strategies," says Baty. "Companies have discovered often the hard way - that one size doesnt fit all when it comes to Sourcing. The approach emerging today is more mature and limits exposure to risk. However, the complexity of managing multiple Sourcing contracts or "multi-sourcing" is considerably deeper."
Baty and Longwood warn that consolidation in the Services sector means buyers must focus greater attention on due diligence, as well as plan for migration and transition should the need to switch provider in mid-contract arise.
Baty says: "CIOs can no longer run their Sourcing commitments in isolation from the rest of the organisation. Any decision must be part of an enterprise-wide strategy. They must improve their business skills and concentrate on building business cases, especially when it comes to comparing the benefits of in-house and offshore development."
The event, "Outsourcing The Next Generation" is the biggest ever single-topic conference hosted by Gartner in Australia, contradicting the current downward trend in the local IT events sector.
"We are delighted with the response to this summit and expect more than 300 key IT and business decision-makers to attend both days," says Baty, chair of the event. "Sourcingat this time isa hot topic and burning issue for organisations across Australia."
Gartner Technology Summit Outsourcing the Next Generation beginsnext week Tuesday 29thJuly, at Darling Harbour Convention Centre. PDF brochure attached. To register interest or attendance in event, please call Jo Lobban on 02 9459 4692 or email joanna.lobban@gartner.com****
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