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Flexibility Is A Primary Driver For Offshoring IT

The mega deal with a 10 year contract is a fossil stuck in the past decade, clients are too risk averse to commit to a multi-year offshoring deal in a deflationary environment. The new mantras for CIOs are: agility, flexibility, and short-term spending with clear value and no financial ROI's over 18 months. As the offshoring industry recovers from the bad press of one chairman's mistakes, they are offering more flexible solutions than ever to entice and retain customers. In a recent study by Forrester across 947 companies in Europe and the US, it is evident that even after the bad press, more than 40% still seek to increase their application outsourcing efforts, and the main driver behind this is flexibility.

In the current economy, where many organisations have seen sales fall between 30-50% in just 12 months, cost cutting has become essential for survival. However, offshoring is not just about saving money on IT services, it is just as much about a trade-off for flexibility. Below demonstrates how both clients and service providers are adapting to create a more flexible working relationship:

1. Service providers are willing to work on performance-based model in order to mitigate risks for clients. The shared partnership demonstrate their commitment, flexibility and a willingness to walk the walk with the client and only reap the benefits once the value has been realised.
2. Agile models are changing the nature of offshoring. Projects used to fail because everything had to be scoped in unyielding detail, with all of the requirements up front. Now, companies are looking to shorten the length of contracts and find other means of creating flexibility in their service agreements. Many offshore providers have adopted agile methodologies to help clients work in this new fashion.
3. Suppliers are offering clients on-demand models that enable them to ramp up or down on a variable basis with only a few weeks notice. Clients can pay for services on as-needed basis.
4. Clients are becoming more flexible. Som Mittal President of Nasscom notes that, "clients might offer more flexibility to complete work in a particular location or at a particular time that's more convenient to the outsourcer"
5. Leveraging past experience: As they have been on the global scene since the late 1990's, and been part of many successful/failed projects they are getting better at asking the right questions up front, and hence better at meeting expectations. The primary driver behind offshoring failures are a mis-match in expectations.

The economic downturn has provided some great opportunities for IT Offshore providers to adopt more flexible delivery models. Clients are willing to test the waters and with the right governance, training, and retained in-house IT resources there is no reason why any successful partnership is just a stone's throw away from realisation.  

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