What’s the big deal about big sourcing deals?
A few days ago, I was reading an interesting article on “The Basics of Moneymaking” by Ram Charan, which summarizes the essence of his bestseller “What the CEO Wants You to Know : How Your Company Really Works”
The book, just like this article, tries to succinctly articulate the need for everyone to understand what their business is all about. I had attempted to do just that in my previous blog [It's that time of the Quarter: Offshoring accounting]
A colleague mailed me offline agreeing with the oversimplification of our business of services but wondered if this was also true of the larger IT sourcing deals. I think the basics if our business remain the same for large or small deals. During the course of my consulting engagements, I get to observe the dynamics of sourcing at both ends of the spectrum: client leaders formulating offshoring and sourcing strategies and practicing the tactics and our (‘vendor’) teams working hard to facilitate it by leveraging on the delivery and execution capabilities.
Some of my recent gigs have been with a few of our larger accounts in North America where scores of our teams work on some of these larger client engagements. And even there, the ‘business of services’ is no different. Case in point was the news headline from a couple of years ago. “ABN deal is a big step for Indian outsourcing industry” Caveat: the intent here is not to comment on this specific instance of sourcing but how news like this make for splashy headlines and commentary by consultants. After the hoopla over the announcement, it gets to ‘business as usual’ which means that folks at both end of the spectrum roll up their sleeves and begin delivering on promises. Though I have not been involved with the client in the news article, it is not hard to visualize the dynamics : these large/strategic deals are typically formulated to provide a structure to the relationship between sourcing organization and service vendors.
Back to Ram Charan’s article. The basics of “moneymaking” in our business continue to be the same whether it is a big-deal or a smaller one. Our sales/account teams are responsible to ensure that we continue to get a steady stream of projects [“pipeline”] to keep the relationship going, and ensure that the projects have a positive operating margin. In return for the margin, our program managers ensure that there is a right team in place to take on the projects for the client, to deliver software solutions successfully.
What does it mean to individuals, even developers at the bottom of the delivery totem-pole? Big deal-or-small: the execution is still about ensuring successful delivery of individual projects and programs for the client.
Comments
Here's a quick thought: at least one of the "big deals" about big deals is that they are a marketing and promotion tool for the multinationals who do not want debate but swift adoption of global sourcing. Media needs a headline to splash and nothing is more headline-esque than a deal worth hundreds of millions or in some cases a billion or more.
Posted by: michael | July 6, 2007 05:29 PM
You said it Michael. And this is exactly my point: do the journalists who report on the big-deals know, or care to know about the workings of the ‘deals’
The bottomline: big-deal or small, it is still the same basics (and grunt work) for most part.
Posted by: Mohan | July 6, 2007 08:57 PM
At a sales/account or program mgt level , larger outsourcing deals could get complex with respect to delivering the desired cost savings , best practices , governance ,security & risk compliance , the growing web of SLA’s , program management etc
Posted by: Chetan Bhor | July 23, 2007 05:04 AM
Large deals imply lesser number of vendors and hence, lesser TTCs or Throats to Choke. It is also a function of the corporate strategy adopted by the company undertaking outsourcing.
From economics perspective, I can see such deals enabling demand aggregation and a proper splitting of demand v/s supply. This demand management is critical (per ITIL v3's Service Strategy) and hence, strategic in nature as well. As far as I can see, it helps reduce coordination cost at client's end, helps developmental opportunities at service provider's end, and helps senior management on both sides get a better view of future path.
Relationship building is definitely a plus. However, excessive dependence on a sourcing partner can have risk of moral hazard in the principal-agent setup.
I don't see a big deal in larger sourcing deals as we are yet to see still larger deals. New records will be set !
Posted by: Manik Patil | October 3, 2007 05:17 AM
Valid points Manik. I like the whay you articulate concept of TTC :-)
Posted by: Mohan | October 4, 2007 01:36 PM