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Buy relationships, not technology

Buy relationships, not technology

Relationships are the future and managers must establish and manage long term relationships with a wide portfolio of suppliers.

It’s not only relationships with your customers that count: the relationships with your staff and suppliers are also vital. And in times of economic pressure it can be difficult to keep that in mind. Cutting costs is top of the list in many boardrooms. It has to be done but it’s one strategy that can really backfire as time passes.

Outsource that IT initiative or do it all in-house? An increasing number of companies face this decision every day and it must be very tempting to think of outsourcing as a good way of saving money. But Gartner analysts, speaking at the company’s annual European Symposium ITxpo conference in Cannes this week, have warned that focusing on cost reduction alone will probably not work.

There’s change ahead Gartner forecasts that, while growth in the IT services market is slowing down, the outsourcing market is set to grow at 14% year on year until 2005. But outsourcing should be at the centre of the business, making best use of capital to provide resources at the right time, and allowing the business to focus on its core competencies.

According to Roger Cox, VP sourcing management, “The concept of buying and owning all products, services and resources is becoming a thing of the past. Relationships are the future and IT and businesses managers are coming under increasing pressure to establish and manage long term relationships with a wide portfolio of suppliers.”

Cox warns that long term contracts are being signed on the assumption that there will be six years of “steady state” following the initial transformation but, in fact, there will be no steady state. In reality there will only be continuous transformation. Over the period of the contract needs will change and technology will change. It is not a simple ‘one time’ purchase, but rather a relationship that is being entered into. And both parties have to be flexible and responsive and understand exactly where their reponsibilities lie. Regular reviews will be necessary, looking forward as well as backward.

Choose your partner And, according to Gartner Dataquest senior analyst, Elena Christopher, “Normal will never be the same again. The IT services market is entering the toughest environment in recent history and is set for a shake out.”  Christopher advises service providers to focus on their core competencies and partner with companies that best provide key capabilities, which will leave the industry with a number of large aggregators at one end of the spectrum and a range of specialists at the other. Those in the middle will find it difficult to survive.

Key criteria Gartner’s advice on making sourcing a success is to focus on three key criteria: review your strategy (is it a core business process, will it support you beyond 2002, can you manage it all?); check the health of long-term deals (do they cater for the future, how dependent is your business on the deal working, is there an exit strategy?) and challenge the status quo (don’t count on achieving a steady state).

For more information on the symposium, go to www.gartner.com/symposium

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http://www.gartner.com

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