Why traditional outsourcing is not working

In traditional outsourcing, we chose a service provider on a temporary basis.  They provide us with one or more functions of the business.  It may have been provided by the enterprise itself.

This is similar to the in-house staff.  The only exception is that these employees are not under the payroll.  The company is requested to make a payment for a fixed number of hours every week or month.  The technical skills are used.  But the payment is is made usually for more persons than those on payroll.  The IT support is often poor.  The payment is given on the basis of technical resources rather than the network. 

But managed services are different than traditional outsourcing.  The system is beautifully designed.  It is also supported very well.  So we need to choose a managed service provider for the outsourcing.  The cloud based technology is taking the place of traditional outsourcing.  The clients can check the applications and services with the help of the internet.  The cost of this model is declining.  There has been a change to invention and the application of technology to the new consumers.

A survey has been made on 568 companies.  Forrester did this survey.  It was done in countries like US, France, Germany and UK.  Cost cutting has a low priority.  The clients are not satisfied with the work.  It has been observed that the clients are not interested to invest in enterprise resource planning and human capital management software.  There is a steady growth of customer relationship management.  The companies are investing in advance predictive analytics. 

The traditional outsourcing has failed to work due to the reasons like the risks of performance taken into account by the buyers.  There is no connection with the strategic goal in the traditional contract.  The goal of the company and the contractor does not match. 

Generally the bid price predominate in the recruitment process of the contractor.  The opportunity for judging the performance of traditional contract is very poor.  The performance is not assessed properly.  The contractor’s figures cannot be trusted.  Everybody wants immediate gain.

According to Gartner, traditional outsourcing is going to comprise  20% of the major 100 Information Technology service providers.  There is very limited growth in most parts of the world.  In the opinion of Mr. GianlucaTramacere, the outsourcing companies failed to create opportunities from challenges.  Their disappearance is inevitable. 

From the statistics, it is clear that the IT services globally will increase  2.1% by year on year basis.  It has reached $251 billion.  In 2011, the cloud servicing has nearly doubled from $3.4 billion to $5 billion.

In traditional outsourcing, the employees do different jobs for the company.  The service provider recruits the employee and they work on the necessary assignments.  In the information technology outsourcing, the data centers and networks are managed in a responsible way.  The networks may include LAN, WAN and telecommunications.  In a facilities management company, the managers of property have become its employees. 

But the greenfield outsourcing is better than traditional in the way that there is no need of recruitment.  A new company is delegated with the duties of providing a new service.  It can do computing from remote location by wireless means.