Paul Allen, Partner and Managing Director, TPI shares his views on how the outsourcing market would evolve in 2009 given the current financial crisis. I have summarized some of the points below:

Impact for the rest of 2008:
-Budget for back office functions in most companies will get scrutinized and scaled back.

-Existing contracts maybe called upon to scale back on the bells and whistles to lower costs.

-New projects with even a strong business case would be held back.

Impact for 2009:

-2009 should see a growth in outsourcing through added scope.

-Divested operations could be a major growth factor.

-Transformational outsourcing will be put on the backburner.

-Increased government involvement in management will not lower outsourcing.

Ray Wang provides an interesting perspective on what customers are demanding from ERP vendors. 24×7 support, transparency, SLA based services and better pricing are some of the factors he brings up. I can see similar demands on the services side of the business as well. Below's a list of some of the stuff I see happening:

- Pay-as-you-go pricing for "horizontal" BPO processes.
- Committed year on year productivity improvement.
- SLA based reward/penalty clauses.
- Ability to "own" applications rather that just get by the day.
- Transition at zero cost to the customer.
- Usage of reverse engineering tools to improve the quality of transition and possibly move towards "ownership" faster.
- Ability to 'transform' the shop through improved and streamlined processes.
- Quick rampup and rampdown.
- Well defined "unit of work" based productivity.
- Virtual offshore development centers to minimize security risks and lower switching costs.

Asking questions to a customer can sometimes be daunting. You need to get the customer to like you, but if you don't qualify the lead, sales productivity goes for a toss. Asking questions on decision making authority, budgets and long term plans at the outset can put off some customers. Here are some nice ways to ask the tough questions.


Figuring out the decision making authority:
 - "Besides you, who else would be interested in this solution?" This question is better than the more direct "Who is the decision maker?" question as it gives importance to the person you are taking to while you ask for more details. It also de-personalizes the question by focusing on interest in the solution as opposed to decision making authority itself. The flip side is that the customer might end up giving you a list of names that you might need to sort out.  
- "I would like to give you a comprehensive presentation on our solution and also discuss commercials. Besides you, who else should I invite to the discussion?". Putting commercials into the question would likely get you the name of the person who signs the cheque.

Figuring out budgets:
This is one area where direct questions sometimes are like a complement to the customer. So shoot straight. "How much do you want to spend on the solution?". The "you" is critical as you are putting the customer into centre stage. If you feel awkward, you may want to try this:
-"An online trading portal is a large, multi year initiative for most investment banks I have dealt with and many of them have a staggered budgeting process. Would your budgeting cycle permit a large fixed price quote?" Depending on the answer you can ask further questions to get an idea of the number. The idea is to avoid a direct numbers question. Ask for a range rather than a number. Also make sure the number is the amount they want to spend on services rather than the entire budget.

Urgency of the solution:
This area should always be explored after you have done enough digging on the problem itself. Jumping to the solution timeline without "building up" the problem can backfire. Assuming you have done the groundwork, try something like this:
-"The trading platform is clearly important for your business and will start paying back from day one. We have delivered a similar solution in under twelve months for a large swiss bank. How soon are you looking at a solution going live?" This question reinforces the need, plays back the benefits and builds credibility before popping the timeline.

Asking qualifying questions can be tricky and requires practice. But knowing what questions to ask and how to ask them is a must for sales success.

Dinesh Goel of TPI says "Corporations deciding on a sourcing strategy need to answer the “chicken or the egg” question: what comes first - the fix or the move?" "Fix" here means improve efficiency and effectiveness. "Move" refers to outsourcing. He goes on to propose the following framework for making the decison:
  

It would be interesting to place the fix first /move first dilemma in the context of the larger sourcing problem. What to outsource and what to retain in house is a more fundamental problem. You obviously want your own people to work on the more strategic stuff. But what if your strategic stuff is all messed up and you don't have the skills needed to fix it. You might then opt for a Move (bring in a vendor)-Fix (let him change the model and also empower your people)-Move back(take your baby back and manage it with the newly empowered people) model. In this case you would go in for a transformational partner rather than just someone who can just drive efficiencies. I think of it something like sending your kid to a great boarding school.

To cut a long story short, the whole move-fix/fix-move puzzle needs to be viewed in the larger context of what is strategic to your business, whether your people have the skills needed and what type of a partner to engage to transform the areas that need 'fixing'. Once you have this nailed, you can go on to decide whether to fix first or whether to move first.

Peter Allen over at TPI argues that vendors need to know where they stand on the sourcing continuum (What type of a provider am I ?) and buyers need to know what type of sourcing they need (Should I go for a transformational partner or stick with a commodity player).

JP proposes the following mantra for buy versus build technology decisions (building something inhouse versus buying a commercial product:

"If the problem is generic use opensource
If the problem is specific to a market segment use commercial
If the problem is unique to your organisation use your own resources"

Buy versus build decisions are often complex with political ramifications.

If you make a build decision, you often need to decide on whether to outsource and if so, what to outsource. When it comes to outsourcing, I use the following broad pattern of thought:
-Think deeply about the role IT is playing in your business today, and where you see it going tommorrow.
-Look at your application portfolio and your people capabilities in relation to the role you see IT playing. That will tell you where your crown jewels are and also point out your capability gaps.
-Use outsourcing to fill capability gaps in such a manner that your own people can polish your crown jewels.

Enough said for a Sunday afternoon!

The five year rupee dollar exchange rate clearly seems to trend towards a stronger rupee. Here's the picture from Yahoo.

-Long term contracts with US clients would becoming less attractive and compa nies would start looking at ways to avoid long term bill rate lock in.

-With top managers getting incentivized on margins, internal resource arbitrage would start happening with non US clients being able to command more senior and experienced resources. A rupee spent in servicing non US clients would add more to the bottomline than a US client.-Sales folks would start getting incentivized not just on topline but also bottom line and revenue quality. Not fair eh ? Well, people who sell profitable projects are better than people who sell unprofitable ones. Now, before I open up a pandoras box, let me move on to the next point. 

-Fiscal management would move down to the project level and margin management which is currently a delivery management responsibility would start becoming a project manager responsibility.

-There would be an added incentive to apply the offshoring model to business segments like consulting to squeeze out even better margins. Standalone consulting that cannot be offshored in itself and does not lead to downstream business would be questioned.

Emmy says it is surely possible. John argues that SaaS projects simply can't be offshored. He sites high responsiveness, Internal code consistency, customer-collaborative product development, far lower maintenance effort,
System engineering and speed to market. Raj is of the opinion that SaaS delivery models would provide an alternative to offshoring. What do you think ?