June 04, 2012, 2:34 PM — Once upon a time, an IT service provider could feel confident marketing itself based on two strengthsÂprocess expertise and scale. But in an age of cloud computing, virtualization and automation, staff size may no longer matter.
Even as HP's fate once it sheds 27,000 employees is still up in the air, the headcount required to staff a successful outsourcing engagement is most certainly decreasing. And the days of outsourcing-related layoffs and the "lift and shift" of the remaining labor force to a third-party provider aren't likely to return.
"The number of resources that a provider has on staff used to mean a lot more than it does today," says Brian Robinson, research director for business and IT services strategies at outsourcing analyst firm HfS Research. "The average outsourcing deal size is decreasing, while the number of deals continues to increase. The market is starting to realize that it is about engaging the provider with the best overall value proposition, as opposed to the biggest or cheapest provider."
In today's buyers outsourcing market, it's outsourcing customers that may be driving this change. "Buyers are two steps beyond reducing headcount," says Todd Hintze, partner with outsourcing consultancy Everest Group. "While interested in a more efficient and effective service delivery, [they] are now seeking transformation."
Someday "your mess for less" may be supplanted by "our processes, your people," as customers seek out providers who can transfer their expertise and methodologies to the client's existing IT staff. Where outsourcing providers used to say, "tell me what you do and I'll do it (for you), or, better yet, give me your people so we can limit operational risk," says Marc Tanowitz, principal at outsourcing consultancy Pace Harmon. "The new approach is, 'I'll tell you what is best and you tell me [whether or not it will] work.' This new dynamic brings outsourcing relationships to a more advanced state."
"The most mature providers are already pushing the 'virtual outsourcing' value proposition to their clients," Robinson says. "Staff transfer is not a differentiating capability for the IT majors.'"