We have interviewed Mr. Thorsten Rüß from ZELOS Management Consultants on his experiences in working with German Buyers, Critical Consulting Areas, Sourcing Destinations, Decision Drivers, and on the question of Big vs. Smaller Service Partners.
Mr. Rüß as partner with ZELOS Management Consultants your focus lies on sourcing strategies, project tenders, contract and transformation management. Could you please give us an insight on your experiences in working with clients in Germany and which part of it is most critical for you?
As most of our customers have already gained experience in IT sourcing, we are often engaged in 2nd and 3rd generation outsourcing situations. In this context our expertise is mainly required in the area of sourcing strategy optimization and contract (re)design – in order to adapt sourcing split and provider selection to state-of the art offerings (e.g. cloud services).
Our customer focus is on financial services industry, insurances (healthcare and others) and the energy & utilities sector. Especially companies in these sectors are challenged by the increasing regulatory requirements, IT security & data protection challenges as well as a lack of well-skilled and experienced human resources in the area of IT governance and provider management.
When clients come to you and ask for advice, which areas do clients feel most unprepared with and how does an assignment usually look like (onboarding, project time, areas and level of involvement, etc.?
Only few IT managers and procurement specialists hold expertise in the state-of-the-art design of IT service catalogues and service definitions. This practical knowledge is indeed crucial to successfully translate complex business requirements into professional contracts with IT service providers. Furthermore, we register an increasing demand to improve organizational and processual aspects of IT governance and day-to-day provider management.
Whilst some years ago, customers did mostly ask for assistance in rather short strategy and tender projects, nowadays the majority of our engagements is rather long-term (>12 months) and often focuses on transformational tasks like the implementation of sourcing strategies, the management of transition & transformation projects and the active shaping of provider relationships. This might sometimes also include an interim takeover of customer roles.
What are your experiences with sourcing destinations and how much is the location of the delivery a criteria when advising clients? What are the features that determine a fit or non-fit of the delivery location?
Offshore IT outsourcing still offers the most attractive cost effects for customers, also several European nearshoring destinations are on the rise. However, data security aspects and binding rules by regulators limit the interest of ZELOS’ key customers in near- and offshoring solutions. Companies that have no global reach by themselves, also look for regional and cultural proximity of their sourcing partners. When moving offshore, well-known, established providers are often preferred, which means that “brand” seems to be an important factor to cope with the perceived uncertainty of global service delivery.
What are the main drivers in our markets for working with external service providers?
The most commonly mentioned drivers for IT outsourcing are still the concentration on core competencies, a persistent cost pressure and the demand for flexibility. Furthermore, an increasing complexity of IT solutions combined with decreasing availability of skilled personnel renders IT sourcing the obvious solution.
Big players or small specialists? What is the preferred choice and how is this connected to specific industries?
In case of 1st generation outsourcing customers still tend to choose „big names“, especially in the area of IT infrastructure, where complexity and technological interdependencies are rather challenging and transformational risks are expected.
With more experienced customers (in 3rd generation outsourcing and in application management outsourcing) we observe an increasing interest in multi-provider sourcing solutions (best-of-breed) with specialized providers for individual services as well as vertical sourcing strategies (e.g. SaaS).
This underlines the general market trend to select providers at „eye level“ and shorter contract terms (less megadeals).
And back to the destination question. You recently published a study about South Africa’s ICT/BPO industry. Could you please give as short conclusion where sourcing to South Africa brings benefits and what are the opportunities, specifically for German or otherwise for international clients?
Especially in the area of Business Process Outsourcing (BPO), South Africa has become an interesting location for off-shore service delivery. Expertise is available e.g. in the area of front-office services (CRM) and special transaction for the finance industry. Cost rates are attractive compared to European locations. The still existing gap to Asia however might be compensated by qualitative aspects.
As an IT outsourcing destination, South Africa has gained maturity, but still struggles with the availability of a broad base of highly skilled human resources and the small number of positive references (nevertheless, Amazon Web Services is one of those). As the connection to the international data network has been considerably improved, we see potential for example in the area of cloud services.
Thank you for this interview!
Thorsten Rüß is partner at ZELOS Management Consultants (www.zelos.consulting) and holds experience of more than 20 years in IT sourcing from various management positions on customer and service provider side. Since 2005, the business economist is exclusively acting as an executive consultant and has implemented various sourcing projects for renowned customers in the industry sectors finance, energy, retail, logistics and manufacturing. His consulting focus is on sourcing strategy, tender processes and contract negotiations as well as on shaping and accompaniment of IT-related transformation processes.
Interviewed by Stephan Fricke, Deutscher Outsourcing Verband e.V. www.outsourcing-verband.org