Key Service Provider Management Issues to Be Discussed at Gartner Outsourcing and Vendor Management Summit 2010, September 14-16 in Orlando Although buyers in the U.S. are among the most mature and aggressive users of IT services from external services providers (ESPs), service providers must understand some unique and differentiating behavior to be successful in the U.S. market, according to a survey by Gartner, Inc.
The impact of the recession can be clearly seen in the form of more-cost-conscious U.S. buyers of services. "Compared to global averages, buyers in the U.S. show a slightly more-conservative approach to IT adoption, and a high focus on IT cost as they approach external services contracting. They also will focus on practical IT operations ("keep the lights on") and will pay less attention to business innovation in IT as a driver for using IT services," said Allie Young, vice president and distinguished analyst at Gartner. "To capitalize on U.S. IT services opportunities, service providers must have current insights into buyers' 'pain points,' intentions and their expectations from service providers."
Between November and December 2009, Gartner surveyed 213 U.S. organizations to better understand how and in what ways organizations that use and are knowledgeable about the use of externally provisioned IT services have been affected by economic changes and what their plans are for using ESPs.
The survey found that 48 percent of U.S. organizations expect to increase their spending with ESPs in 2010. However, the overall trend for U.S. buyers of all company sizes is to move toward adopting maturing technologies with manageable risk. Among all company sizes, the survey showed a movement away from aggressive adoption, indicating that the economic crisis has brought more conservatism to technology adoption – the latest, most-advanced technology carries toomuch risk to deliver.
U.S. buyers indicated their top drivers for using ESPs are to reduce the operating costs of IT and to ensure IT availability. “Given the impact of the economic crisis and strong discipline on cost controls among U.S. buyers, providers must heed how critical it is to accentuate your practical skills to run the business,” said Ms. Young. “These basic messages of cost takeout and IT availability must be prioritized, even for higher-value solutions.”
Sixty percent of U.S. buyers said they renegotiated service contracts in the past two years, while 47 percent said they used offshore services delivery, and 40 percent indicated the use of technology as a service. Many changes in behavior that occurred during the economic downturn will have an impact by possibly opening new opportunities or causing more caution. Gartner recommends that providers be even more attentive to proactive management of client engagements and revisiting clients with whom contract renegotiation has reduced profitability. Communicate openly on the impact and the outcome, if adjustments aren't made.
"The overall positive picture of the market willingness of U.S. buyers to use ESPs in support of IT and increased spending supports Gartner forecasts for a return to growth in 2010," said Ms. Young. "However, service providers will face a U.S. buyer with cost-focused priorities and a multiprovider strategy, which means many of the competitive dynamics of 2009 will continue. It is also likely that the influence of high levels of contract renegotiations and the strengthening influence of the CFO and procurement in many U.S. organizations seen in the past two years will continue to have an impact, thus keeping pressure on IT budgets and cost control but also opening up some issues of service quality."
Ms. Young will provide more-detailed analysis on the state of the IT services and outsourcing industry at the Gartner Outsourcing and Vendor Management Summit, taking place September 14-16 in Orlando. This Summit is the only event that provides a comprehensive view of the entire outsourcing market — infrastructure, application and business process outsourcing, global delivery and the use of offshore providers, as well as issues and trends about new delivery models, such as SaaS. Members of the media can register for the summit by contacting Christy Pettey, Gartner PR, at firstname.lastname@example.org. For further information on the Outsourcing and Vendor Management Summit, please visit http://www.gartner.com/technology/summits/na/outsourcing/index.jsp.
Additional information from the event will be shared on Twitter at http://twitter.com/Gartner_inc and using #GartnerOut.
Additional information is available in the Gartner report “Survey Analysis: U.S. IT Services Buyers’ Focus on ‘Run the Business’ May Thwart Providers’ Efforts to Introduce Higher Value Services.” The report is available on Gartner’s website at http://www.gartner.com/resId=1383125.
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