Outsourcing Expected To Increase

Smart Solution Providers With Full Services Can Profit

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Companies hit hard by the economic slump will increase spending for outsourced services offered by solution providers, a recent Gartner study predicts.

The news comes as no surprise to thousands of solution providers that have been adding new services to their business models over the last several years to accommodate increased customer demand for outsourced services.

"The nature of business is long-term outsourcing," said channel veteran Steve Ross, CEO of state and local government solution provider DynTek, Irvine, Calif., and a former executive at Toshiba, Inacom and IE. "The customer is looking for someone to provide an integrated, comprehensive suite of services."

Ross recently won some big IT accounts by adding management process outsourcing services to DynTek's offerings. Those wins are part of a trend sparked by customers who shift spending from the capital to the operating budget. That trend is driven by enterprises and midsize businesses that realize they don't need to own or operate a specific piece of technology, said Lisa Stone, an analyst at Gartner and author of the report, "Predicts 2002: What's Ahead for Sourcing and IT Services."

Besides business processes, other hot technologies for which enterprises and government agencies will fast-track approvals include security, wireless networks, business continuity plans, and applications and services delivered over the Web, Stone said.

"Companies want to be technology users, not technology managers," said David Koretz, CEO of Blue Tie, a provider of managed Web-enabled contact management solutions. "If you have someone who's spending all his time keeping e-mail up and running, then he's wasting his time because it's not his core competency. You have to help customers get rid of capital expenditure. For a company on a tight budget, that's very appealing."

Selling the solutions, however, won't always be easy, Stone said. Solution providers must continue to present rock-solid returns on investments by proving the solution improves functionality, cash flow, revenue streams and cost savings, she said.

Customers are becoming more savvy and will demand contract structures that ensure ROI, Stone said. The best contracts will be based on business cases developed by the customer and solution provider and will set certain expectations, she said.

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