Despite the recent frenzy around the boom in outsourcing, this "trend" isn't a new phenomenon. The concept of U.S. firms outsourcing various functions to low-cost, high-talent labor pools has existed for more than 20 years.
Until recently, large corporations dominated the outsourcing landscape, often engaging the services of major players like IBM (NYSE: IBM) and Accenture (NYSE: ACN) for information technology projects.
What is new is that small to mid-sized companies are beginning to recognize the value of outsourcing, not only for technology services, but also for business processes. Researchers at Gartner Group predict that 80 percent of U.S. companies will have engaged in high-level outsourcing discussions by 2004, with the greatest interest in applications and business process outsourcing. Also of increasing interest and demand is the use of offshore delivery centers in an outsourcing strategy.
Often used interchangeably with "offshoring," the term "outsourcing" has much broader-reaching implications. Whereas offshoring typically refers to hiring supplemental manpower (usually from countries like India) on a per-head-count hourly rate, the practice of outsourcing exceeds this staff augmentation mentality. Today's sophisticated outsourcing paradigm embraces a global delivery model, risk management/governance contingencies, and long-term service level agreements (SLAs) that span both technology and business process services.
Just as the market definition and scope for outsourcing services has evolved over the past decade, so too has the purchasing audience. Historically, IT executives have been the primary buyers of outsourcing services, largely due to the technology intensive nature of early outsourcing arrangements. While the CIO's role is still integral to the decision-making process, financial and business-line executives and CEOs are now driving the need for more business process-focused outsourcing solutions and therefore have emerged as a new buyer.
Mid-sized professional services firms like Kanbay International Inc. (www.kanbay.com) that specialize in a particular market niche (e.g. financial services) are in a strong position to reach today's newer, middle-tier market with global application management and business process outsourcing solutions. Kanbay engages a number of innovative strategies to differentiate itself and educate this vertical market on the value of outsourcing.
"The rise of the outsourced economy is creating a new set of management challenges -- and opportunities. While the industry's top players have created the demand for global outsourced solutions, more mid-tier companies are getting into the game. This has opened up a viable market for managed solutions providers to serve this customer segment," said Shiraz Patel, president of Kanbay Managed Solutions Inc.
How to find clients
Patel leads the Kanbay subsidiary that provides financial services clients with global delivery options and a mature governance model for application management outsourcing (AMO) and business process outsourcing (BPO). He offers the following advice to IT services/software and professional service firms looking to enter the outsourcing market. Kanbay has successfully employed a number of these venues in its own marketing approach:
1. Seek objective analyst opinions. Meet at least quarterly with industry analysts such as Gartner, Aberdeen and IDC, who cover outsourcing industry and managed solutions companies. Schedule in-person visits to brief these groups on your firm's history, client experience and vision. Likewise, analysts can help validate your marketing approach, serving as third-party, unbiased advisers that in turn educate potential customers, partners and investors.
Many analysts host conferences and publish newsletters and special reports on outsourcing topics in which you can participate.
2. Participate in industry/educational forums. Outsourcing conferences enable companies like Kanbay to showcase their clients' success stories and achievements. This interactive, peer-to-peer format allows business prospects in a similar industry to address common challenges, learn by example, and to meet the outsourcing partners behind customer achievements.
3. Host seminars and Webinars. In a market saturated with hundreds of seminar offerings, companies like Kanbay have the most success with brief (two hours or less), highly targeted programs that demonstrate solutions geared to business challenges within a specific industry. Webinars are also attractive to sponsors and clients alike because they are cost-effective, require no travel and contain similar content to live seminars.
4. Leverage the media. The media is a powerful and influential source for educating potential customers on outsourcing trends and solutions. Consider contributing to publications that feature customer case studies, quote industry experts and publish opinion articles authored by outsourcing company experts.
5. Evaluate your partnership strategy. Many smaller and mid-sized firms are attracted to the deep expertise and capabilities of the large outsourcing companies, yet often find their services cost-prohibitive. When targeting this market segment, companies like Kanbay offer a blended model for the financial services industry, engaging with clients and managing risk-similar to larger outsourcers with whom Kanbay partners -- but at competitive rates.
Henry DeVries is a marketing coach and writer specializing in lead generation for professional service firms. An adjunct marketing professor at UCSD since 1984, he is the author of "Self Marketing Secrets" and the recently published "Client Seduction." Visit http://www.newclientmarketing.com or e-mail questions to henry@newclientmarketing.com.
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