Dinosaurs, Meteors and a Fork in the Road Awaits Us in 2011

Posted on December 30, 2010

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When I was once again contacted by the Shared Services and Outsourcing Network asking me about my predictions for 2011 I must admit that my thoughts immediately turned to the significant changes in the eProcurement market landscape and how this might influence organizations in terms of their approach regarding the contemplation of outsourcing as a viable option.

In essence, would organizations be reactionary or contemplative in determining their eventual course of action?

Given the impact resulting from the significant paradigm shift in which end user clients are openly moving  away from the belt with suspenders, no one ever got fired for buying IBM mindset that has dominated the market for so long, to one of embracing the dynamic adaptability of the smaller Software-as-a-Service “SaaS” vendors, this is a linchpin question.

After all, when Cabinet Office Minister Francis Maude recently announced to the UK Government’s 31 big IT/ERP players that the halcyon days of the overarching initiatives which delivered to these vendors tens perhaps even hundreds of millions of dollars were over and, that the government would actively seek direct relationships with smaller vendors, one would possibly conclude that central government were themselves embarking on a course of self-determination.   A point that was perhaps emphasized by Maude’s further “direction” (although admonishment might be a more appropriate term) that the big boys are to view the introduction of these smaller players through a collaborative lens  in which they are now to be treated as equals .

Add into the equation the continuing woes of Ariba and the fact that industry analysts are predicting the demise of giants such as SAP, and I could perhaps be excused for equating the big players’ future with that of the dinosaurs just prior to the meteor striking the earth.  In short, and in line with the lyrics from the Bob Dylan song . . . The Times They Are A-Changin!

With the advent of the non-consultancy model in which companies such as Cap Gemini readily admit that they now have to think in terms of months or even weeks relative to producing a tangible result for clients, the aforementioned shift is now at a point of critical mass, or for you Malcolm Gladwell fans, tipping point.

However, and as is often the case with any market driven change, lost in the excitement is the existence of some very real obstacles to a final transformation.  Perhaps we should hold off on blowing taps for the big boys just yet.

You see, while champions of the movement towards lower cost, shorter time line initiatives such as Maude instinctively know that they have to move in a new direction, the mechanics of effecting the desired change is still somewhat obfuscated by the absence of a viable small vendor engagement mechanism.  Specifically, and as is the case with the UK government, they do not have a reliable means of actually reaching out to the smaller, more innovative vendors.  It is at this point, where old habits often die the hardest, that the greatest opportunity for outsourcing exists – at least in the procurement world.

When faced with, and in some cases, daunting task of actually developing and effectively managing the engagement of smaller SaaS vendors, organizations may follow the lead of States such as North Carolina and hit the eject button by looking to outsourcing as a quick and easy way to address a challenging situation.

Unfortunately this kind of approach, in which anecdotal references to overspending become the driving force behind such a strategy, creates more problems than it does opportunities for the outsourcing industry.

The question then becomes one of how will outsourcing providers respond to a client that is motivated by passing a hot potato issue versus thoughtfully contemplating the consequences of a possible approach to solving a complex problem?  It is of course at this fork in the road point where the temptation to just win the business first and worry about making it work later may be too much for some to ignore.

As the big IT/ERP vendors have probably already learned all too well – albeit too late to do any good, that clients motivated by expediency and not understanding, does not bode well for future success, what happens in 2011 will ultimately come down to whether or not outsourcing providers learn from the IT/ERP dinosaurs and take the appropriate measures to avoid making the same mistakes.

If they do, then the big players of the outsourcing world will be major players in the new world order.  If not or, if it appears that the results are not forthcoming within acceptable timelines that extends beyond head count reduction savings to include true efficiency improvements, market patience will be short lived.  At that point, the small mammals of the eProcurement world (re SaaS vendors) will indeed emerge as the dominant force for many, many years to come.

All this being said, what are my predictions for 2011 . . . it all depends on what happens at the fork in the road.

Posted in: Commentary