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In the final segment of a panel discussion with senior technology executives, Forbes publisher Rich Karlgaard focused again on the increased importance of risk sharing between companies and their IT vendors. Karlgaard asked if current conditions had made risk sharing a necessity in client-vendor relationships. “…We’re in this economic world where it’s very risky,” Karlgaard said. “The cost of getting it wrong is really severe. Combined with all these changes in computing – cloud-based computing, the role of Big Data and analytics, consumption economics hitting the IT space, (are) all these things coming together providing a tipping point, ‘you know we want our vendors to take the same risk we do and if we succeed, they get paid well and if we don’t success, we all suffer together?’”
The panel discussion and a Forbes Insights paper considered the rising usage of outcome-based IT outsourcing. Among the main benefits of the outcome model is that vendors assume a larger part of the risk.
iGate Corporation’s EVP and Head of Consulting and Solutions David Kruzner said that that the present climate had placed unprecedented importance on results. “Technology facilitates what we do and how we do it,” Kruzner said. “Or it’s proving the enabler or enablement of being able to execute some of the models.”
Kruzner said that technology now touches nearly every aspect of business. As a result, companies must now measure the success of their outside service providers based on a wider range of performance criteria, not on their impact on one or two areas. “People have finally figured out you can’t look at things in their verticals anymore,” Kruzner said. “We have to look at things across the function, across the organization, across the geography or divisions and really end-to-end.
Sandy Devine, Vice President of Avaya Professional Services, said that the “best CIOs” have recognized this trend. Devine said that these executives “align with the business and come from the business, and really, deeply understand that and lead their organizations themselves to understand what business is trying to accomplish.”
Devine said that the cloud has made it imperative for companies to build closer relationships with their service providers. “In the old days, you took a lot of risk crossing that chasm in what you were trying to accomplish,” Devine said. “As long as you built the spec or delivered the plan, you were done. When you look at the cloud-based models, you make that transition when you start consuming. Your provider is in that camp with you to help drive adoption.”