The recession that hit the globe at the end of 2008 and its consequences as of one of the world’s greatest shake downs are far from over, and most organizations are still working on the “lean and mean” strategy in order to survive.
The global economic downturn is still affecting every industry and organization. Diminishing demands and increasing uncertainties are forcing companies to continuously redefine strategies, transform operating models and realign processes.
The recession is turning into one of the key drivers for transformation of the outsourcing/off shoring landscape – from mere cost arbitrage to partnerships for business solutions. There are several new game changers, and some have become key success factors of a sustainable business relationship:
– The new business engagement models between buyer and service provider;
– The new governance directives for the relationships;
– The acceleration of adoption of new technologies and engagement models by organizations looking to deploy new competitive mission critical applications;
Because a recession’s first impact usually triggers cost-cutting measures, typically a manager will find himself with less people and still having to get the job done. This requires having to do more with less. For service providers it means that they need to strengthen their understanding of the customer’s business. As said by Lemuel Lasher, CSC’s Chief Innovation Officer, at NASSCOM’s Leadership Forum, in 2009, “going forward, the reality will be all about customer intimacy and thought leadership”.
Customer intimacy, as mentioned by Lasher, is not about taking the client to his favorite restaurant or remembering to send a personal note on the CIO’s wife’s birthday, but being able to understand the client’s problem and challenges better than the client actually did. However, this deep understanding is not enough either. Now, one needs to be able to anticipate business trends that will affect the client’s business and competitive landscape. The new order is all about ANTECIPATION!
It is this type business outcome commitment, of the client/service provider engagement model, that will safeguard a lasting relationship and the duration of the contracts. Besides being really in synch with the client’s business, he now expects that the service provider helps him run it, and gets compensated based on the performance is able to deliver. Performance based compensation as a result of running the business strategy aligned with operations will be one of the key drivers going forward in customer relationship and retention.
However, the actual business strategy outcome and alignment represents several challenges for both, customer and service provider. First, buyers will need to do more due diligence on the work they outsource/offshore, in order to be more informative about the business objectives, and thus produce a better platform for a true business alignment with the service provider.
For the service provider, this means he will need to hire more qualified people, so he can perform the new added high end tasks and to demonstrate true business results. The provider’s high level managers will need to be better than the in-house managers. Actually, this will provide an unexpected added value as the buyer will appreciate the quality as they know; they don’t have the funds to pay.
In 2000, two vice presidents in change management for Pricewaterhousecooprers, Grady Means and David Schneider, wrote about a future trend they called “Metacapitalism”. The basic premise was that, in the future, organizations should only focus on the two things that mattered most: brand equity and customer relationship. Their reasoning was that everything else a company engaged in was actually to support those two endeavors.
As a result, everything else would be outsourced, so all energies would be directed to maximize brand value and customer experience. Looking at this same picture now in 2010, it seems that we are closer to this reality. But there is still an enormous ground to be covered, especially by the vendors, in order to be able to align with customers’ business strategies and objectives. Not only will it is necessary to understand the customer’s competitive landscape, but more importantly to recognize customer’s true DNA, in order to anticipate and act upon perceived best opportunities and priorities.
So the landscape going into the future will be about the best combination of management practices, people skills and unbiased cultural views, where one is able to understand, align and anticipate. This will call for types of executives and professionals that have these traits embedded in their overall DNA, combined with the exposure to an energetic and forward going environment. This will definitely make for the best capabilities for visioning and anticipation in the new horizons that are constantly changing.