Wendell Jones
Wendell Jones
Dr. Wendell Jones is a senior executive with 30 years' management experience in the securities, aerospace, and computer industries, as well as the US military.
Most recently, as vice president of Worldwide Service Delivery for Compaq Computer Corporation, Dr. Jones managed a worldwide outsourcing service delivery with 2,400 IT professionals and served as interim COO for the UK and Ireland business unit. Prior to joining Compaq, he served as Senior VP of Technology Services at NASD/Nasdaq Stock Market, where he managed selective onshore and offshore outsourcing. Prior to this position, he led the evaluation, negotiation, and management of a US $3-billion, 10-year IT outsourcing agreement at McDonnell Douglas.
Dr. Jones is the author of several management and IT articles, coauthor of Outsourcing Information Technology Systems and Services, and a frequent speaker at executive conferences. He has appeared on a CNBC outsourcing special and is often quoted in business and trade publications, including Business Week, Investors Business Daily, Wall Street Journal, and CIO. Dr. Jones serves on the advisory boards of several organizations that promote outsourcing information, exchange, objective research, and best practices for customers and service providers.
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The Future of Outsourcing An Interview with Wendell Jones, Senior Consultant, Cutter ConsortiumDo you foresee the continued growth of outsourcing over the next several years?
Yes. One driving force in the growth of outsourcing is the virtual organizational model. Unlike the 20th century integration model where, for example, GM owned all of the factors of production and their entire supply chain, companies in today's highly competitive global economy must achieve speed and agility. They must be able to react rapidly, quickly create capability and capacity in new markets, and get to market fast. Owning all your own resources -- the old integration model -- just doesn't make sense today. You need to form alliances and outsourcing relationships with companies that can provide you with the speed, capacity, capability, and agility you need to compete successfully. Hence, the virtual corporation.
It sounds like companies must be prepared to manage a number of relationships.
You are correct. But to manage all those relationships, you need a different style of management. Recent research about outsourcing relationship management makes some very interesting observations about how management and leadership skills/styles must change. What we have learned over the last decade is that there are three important pillars of successful outsourcing.
The first of the three pillars is the relationship foundation, the ways that both the customer and provider managers go about defining, crafting, managing, and enhancing the relationship from day one. The most successful relationships get off to a good start by creating a basis for long-term improvement of the relationship, capturing intentions as well as terms, carefully managing the expectations of all parties (including business unit managers), and defining at the outset the metrics, scorecard, and evaluation process for continuous improvement of both the relationship and performance.
The second is the management structure. Well-managed relationships also have in place from the start a joint management structure that facilitates frequent, easy communication at all levels, provides for joint goal-setting meetings as well as regularly scheduled performance reviews, and provides training and education programs for better understanding of company cultures.
The third pillar of success is lateral leadership -- strategic thinking, deal making, partnership governing, and managing change.
What impact is e-business having on outsourcing?
The e-business economy is intensifying global competition, causing business conditions and technologies to change rapidly, and bringing relentless pressures to bear on cost and quality. Consequently, companies in many industries are turning to all kinds of new relationships -- outsourcing, alliances, mergers, partnerships, and acquisitions -- to increase business value, reduce risk, and increase market share. Internal and external deal making, strategic thinking, change management, and partnership governance are essential organizational qualities for managing all types of relationships. I therefore encourage companies to go beyond the individual skills and capabilities of outsourcing and alliance managers/teams, focusing on developing lateral leadership qualities into organization-wide competencies.
How does the current outsourcing market differ from a decade or so ago?
Let me respond to that in the context of my background. After managing a $3 billion outsourcing relationship (one of the world's largest IT outsourcing projects) at McDonnell Douglas in the early 1990s, I served on the advisory boards of a number of outsourcing organizations for executives. Through these organizations, I have observed companies begin to realize the importance of putting in place good relationship management processes. Five to ten years ago, companies tended to just hammer out a deal. The provider wanted to get the highest possible price and be held accountable for as little as possible. The client wanted to get the lowest possible price, feeling that the outsourcer would take advantage if it could. Fortunately, the industry as a whole seems to be maturing beyond those old, dysfunctional, adversarial ways of doing business.
Most companies realize that, although they want to get a good deal, they must also create, from day one, an atmosphere that encourages a good relationship. By building trust a day at a time, you can find that, together, you can do more than you could on your own.
Do you have any advice on how companies who have not outsourced before can make certain they do it right?
Yes. Make sure that you put in place a sound contract and relationship management process. Fortunately, today, there are a number of good consultants with experience in outsourcing to help companies do things right from the outset. Because excellent advice and assistance are available today, clients are now entering into agreements on a much more informed basis. They're not getting themselves into bad relationships as often.
Any other changes
Another major change is the move away from total to selective outsourcing. Five to seven years ago, outsourcers were looking for total outsourcing deals. Clients have now wised up -- they realize it's unlikely that one provider is going to be best in class for everything. They also realize that some things should be kept inhouse, and some should be outsourced.
What's next for outsourcing?
I don't want to sound hyperbolic, but ASPs may represent the biggest outsourcing phenomenon of the 21st century. If not the most significant trend, ASPs are certainly the next generation of outsourcing. ASPs are a way for companies to get the applications they need simply by paying as they go. They don't need an IT infrastructure; they can just access applications through the Internet and pay for the services as they use them.
However, there are over 2,000 companies out there claiming to be an ASP, and there are lots of varieties of this business model. This market is still in its infancy, so we'll certainly see a shakeout in the next year or so as a few companies emerge as pure ASPs.
Who are the major customers of ASPs?
Small to medium-sized companies are the major customers today, but I think that, over time, many large companies, even Fortune 100 companies, will turn to ASPs as at least a partial solution.
Any final thoughts or recommendations?
It is difficult to single out just one recommendation, but I would emphasize that we need to begin to develop a new breed of leaders. Outsourcing and alliance relationships require managers who can communicate, influence, and negotiate outward across organizational boundaries both within the customer company and the provider/alliance company, rather than just issue orders downward or across.