Outsourcers join major players

Outsourcing used to be for large corporates and government departments. It was seen as a game of scale, in which only global services providers such as IBM, EDS and Unisys had the necessary range of skills and the financial strength to take over and manage another organisation's information technology systems.

However, the mid-market is becoming an increasingly important part for outsourcing firms, says research firm International Data Corporation.

It estimates that the outsourcing market in New Zealand will grow at a robust compound rate of 6.2 per cent to reach $921 million by 2009, compared with $681 million last year.

Although the 14.8 per cent growth last year was mainly attributable to EDS taking responsibility for running Fonterra's IT infrastructure, future growth will be driven by shorter contracts covering more discrete services.

That opens up the field for a wider range of services firms to get a bigger share of the outsourcing pie. Datacom, Gen-i and, increasingly, Oxygen are seen as taking on the multinationals.

Although smaller organisations see cost savings as the main driver for outsourcing parts of their IT, larger organisations do it for more strategic reasons.

Broughton says organisations will often outsource responsibility for particular pieces of technology because they recognise they can't possess all the necessary skills, especially when the market is tight.

"They could be looking for process effectiveness, so automation and improvement of process is often a key part of what IBM would bring to the partnership."

Process improvement can often mean job losses.

Broughton says that because IBM is a large enterprise it is often able to help redeploy those people in other roles in the company or in IBM.

Last month, IBM signed a nine-year deal to provide Heinz Wattie Australasia with e-business hosting, application management and IT infrastructure development, maintenance and support.

Heinz Wattie business systems manager Ian Gillespie says that by outsourcing non-core activities to IBM, Heinz can free its remaining information systems staff to focus more on improving business processes and supporting the company's growth.

Oxygen spokesman Stuart Dickinson says that rather than looking for one provider to do everything, customers are making selective outsourcing arrangements with organisations - such as Oxygen - which are recognised as best in particular niches.

"They are no longer comfortable saying they should give it all to one organisation, they are now more strategic," Dickinson says. Outsourcers need to be quick to absorb the large numbers of staff picked up as the result of such deals.

"That is one of the reasons Oxygen is so hot on its values journey, because it wanted a culture and destination for people to arrive at," Dickinson says.

EDS human resources manager Mark Rees-Thomas says good communication is paramount when handling the staffing issues around outsourcing.

"EDS is a services company, dependent on people to deliver those services, so the way we treat our staff is absolutely critical and we put huge emphasis on this," Rees-Thomas says.

If staff need to be moved over from a client company, EDS runs roadshows and interviews about what they can expect, then has a special induction programme that includes welcome functions, orientation, intensive training sessions, a buddy system, transition newsletters and websites.

The Fonterra deal meant absorbing 90 staff. Rees-Thomas says EDS has had to hire more staff in some areas to deliver the improved services it is offering.

In some deals, not all staff would be needed. "In such a scenario, like any selection process, staff should prepare their resumes and practise interview techniques," he says.

"Remaining positive through the process is very important. And asking questions at every step is also very important."