Through the new Government E-Strategy, Government agencies are currently
faced with pressure to upgrade technology capabilities and to better interface
with their audiences. Combined with the A-76 initiative that directs Government
agencies to pursue the most cost-effective method of doing business, current
federal strategy now enforces government's need to better understand public
alternatives, submit to extensive requests for proposals to an array of
government and non-government providers, and to perform complex evaluations of
existing operations and functions. These initiatives will drive government usage
of outside sources.
OUTSOURCING TREND
In response to growing competitive pressures and technological innovations,
we believe many companies, both large and small, are focusing their critical
resources on the core competencies of their business and utilizing business
process outsourcing to accelerate their business plans in a cost-effective
manner and perform non-core business functions. Outsourcing provides many key
benefits, including the ability to:
- Capitalize on skills, expertise and technology infrastructure that would
otherwise be unavailable or expensive given the scale of the business;
- Reduce capital and personnel investments and convert fixed investments to
variable costs;
- Increase flexibility to meet changing business conditions and demand for
products and services;
- Enhance customer satisfaction and gain competitive advantage;
- Improve operating performance and efficiency; and
- Enter new business markets or geographic areas rapidly.
As a result, the market for outsourcing services and external services has
experienced significant growth. Gartner Dataquest predicts that the U.S.
external services market will reach $276 billion in 2002, an 8% increase over
the $254 billion spent in 2001. By 2005, they expect the industry to surpass
$395 million. Gartner Dataquest defines external services to include consulting,
application development and integration, management services and outsourcing,
business process management, transaction processing, hardware and software
support, and education and training. Gartner Dataquest foresees the Business
Process and Transaction Management (BPTM) services to have a strong growth rate
as enterprises attempt to reduce the cost of transaction processing in noncore
areas by turning to external suppliers. Worldwide BPTM services are expected to
total $145.2 billion in 2005, as compared to $74.8 billion in 2000.
Typically, outsourcing service providers are focused on a single function,
such as information technology, call center management, credit card processing,
warehousing or package delivery. This focus creates several challenges for
companies looking to outsource more than one of these functions, including the
need to manage multiple outsourcing service providers, to share information with
service providers and to integrate that information into their internal systems.
Additionally, the delivery of these multiple services must be transparent to the
customer and enable the client to maintain brand recognition and customer
loyalty.
Furthermore, traditional commerce outsourcers are frequently providers of
domestic-only services versus international solutions. As a result, companies
requiring global solutions must establish additional relationships with other
outsourcing parties.
Another vital point for major brand name companies seeking to outsource is
the protection of their brand. When looking for an outsourcing partner to
provide infrastructure solutions, brand name companies must find a company that
can ensure the same quality performance and superior experience that their
customers expect from their brands. Working with an outsourcing partner requires
finding a partner that can maintain the consistency of their brand image, which
is one of the most valuable intangible assets that recognized brand name
companies possess.
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