The IT industry at present is one of the largest sectors in all major economies of the world. Reports by world’s leading information technology research and advisory company Gartner speaks about the rapidly growing IT industry witnessing great improvements on investments also. Developing countries like China, India have become most searched destinations for Outsourcing IT Contracts accounting to their intelligent human resources and least cost price.
According to a report by IBEF (Indian Brand Equity Foundation) the contribution of IT sector to India’s GDP rose to approximately 9.5 per cent in FY15 from 1.2 per cent in FY98.
Fig 1.1 Indian IT & ITES sector by IBEF
As depicted from the figures in the picture there has been a tremendous growth in software and other IT Services. Industrialists expect that IT Expenditure will be reaching new heights in the coming years. Moreover, increased expenditure will lead to more projects whether simple or complex. With this the number of complex projects will also increase speedily. Speculating the advancement in technology sector all other sectors have started to take leverage of this situation. The manufacturing sector and service sector are trying to improvise their business culture by taking help from highly professional technocrats. Another important aspect in changing the market trends for business sector is Digitization.
Another report by Nasscom reveals the future of markets and investments in Digital technology clearly and it says:
“Share of Digital technology investment projected to rise from 10% in 2014 to 35% in 2020 and 60% in 2025 Indian technology and services industry on track to reach its goal of $225 billion in revenues by 2020 and further to reach revenues of $350 billion by 2025 “
Considering the above report by Nasscom, one can definitely realize that along with the rising demand of digitization in technology more companies will be building on the latest trends for an overall growth. For this customers would definitely seek experts advice i.e. Techies who have the right combination of skills and experience to deliver desired results in processes like software outsourcing, Application development, Mobile Application Development, etc. This speculation has given birth to a large pool of talents both inshore, near shore as well as offshore, efficiently capable of handling IT projects outsourced to them.
Now more projects will lead to more outsourcing and in some cases offshoring also. In the long run the many customers may complain about the vendors/service providers that they have been charged much higher than the contract budget. Sometimes the service providers happen to take huge amount of money from their customer’s pocket that adds to the overall contract cost. These situations arise due to lack of proper governance structure in their contracts.
These circumstances has affected trust of many customers worldwide on IT outsourcing, thus stimulating negative feedback and decreased revenues in IT outsourcing. To put a curb on this IT Companies have come up with innovative ideas to bridge the gaps between service providers and the customer’s objective. This can only be achieved through proper governance of IT Projects. Poor coordination, lack of communication and other hazels of contract management can be minimized if companies have a proper governance structure for streamlining its critical outsourcing activities.
It is not necessary that a customer will be dealing with only one vendor at a time. Quite often customers tend to outsource different work to more than one vendor or service providers simultaneously, this increases the risk associated as well as time to handle vendor activities. Consequently, the necessity of monitoring vendor’s performance and activities is a prime concern in complex outsourcing processes to avoid gaps between the agreed objectives and deviations. This widening gap if neglected may lead to a loss of large sum of money from the customer’s pocket.
To prevent this, organizations hold governance meetings from time to time and review the performance of their service providers, indicating the weak points and finding out ways of improvement. Here pliXos also agrees with an article of WG Group which states it is critical that companies have a solid understanding of their own business goals and how they can work with vendors to achieve those goals.
The control or governance of the IT outsourcing is the decisive factor for the success of outsourcing projects. It is important to consider all stages of the outsourcing life cycle - from planning through to implementation. Productivity can be greatly improved with the help of proper governance. pliXos also agrees with WG Group with respect to benefits of IT Governance i.e. –
- Cost Savings: Almost every company Outsourcing some part of their work to third party to save “cost”. Developing countries like India are emerging as one of the best destinations along with China, Ukraine and some parts of EU for IT Outsourcing. Reason behind this is the cheap labour cost and the experience in handling projects according to agreed terms and objectives. Moreover companies like TCS, Wipro, Infosys etc have a proven record of handling offshore projects efficiently. Nicely stated in one of the articles in pliXos blog indicating the emergence in more online transaction.
- Strengthens the vendor-customer relationships: Vendor Governance is not a one sided process. It demands the active participation of the customers as well as the service providers. pliXos here provides an opportunity for both the parties to come together on the same page through its popular B2B Marketplace. Through this pliXos has taken an initiative to create a sense of partnership between both the parties which is a crucial factor in motivating the vendor to perform in better way. Sense of belongingness helps to reduce the geographical, cultural and time zone differences thereby fostering a healthy relationship for the mutual benefit of both organizations.
- Improves productivity: There is no doubt in the fact that if proper track of the project is required to be maintained than regular sharing of important information related to the progress of the project should be first priority. There should be provision for the customers to get the information regarding the current scenario about their projects. pliXos here integrates the governance through the most innovative tool The Outsourcing Director. The Outsourcing director reduces gap between both parties i.e. the customers as well as software service providers and streamlines all the necessary phases of outsourcing contract i.e. Project planning, Collaboration tools, Requirement management, Team Management, Source code Management, Quality Analysis, Document Management, Management Reporting.
- Better future prospects of more projects fostering long term relationship: Good services and quality performances are always rewarding. A structured governance structure produces results which the customers had dreamt of. A successful vendor is one which enjoys their customer’s loyalty and trust. Customers usually find it economical to give away more projects to their existing vendors rather than searching a new one each time, provided they get useful work done within the stipulated time. This can only be achieved through proper monitoring/governance.
- Makes the vendors more responsible and accountable for their work: Earlier IT department in any business used to work as autonomous bodies with less responsibility and accountability towards the broader business objectives as a whole. Thanks to the Governance activities that has bridged the gap between the business goals and IT department influence towards it. Now core business leaders and IT department have come together on the same platform and are experimenting new ways to automate the processes in an outsourcing life cycle.
Fig 1.2 pliXos solutions for complete governance and successful implementation of SW projects
In the light of above extract we can say that if all the major stages of an Outsourcing/Offshoring projects can be automated it is possible to achieve what a company will desire i.e. successful IT governance structure.
pliXos proudly takes a stand as one of the pioneers in solution provider to govern all the critical stages of outsourcing life cycle. Its cloud based SaaS tools namely Outsourcing Advisor, Tender Manager, Outsourcing Director and B2B marketplace provides automation in IT Governance along with transparency. This helps the customers as well as service providers to be on the same page. With cloud services making strong foothold in IT Industrialization and IT Infrastructure more companies will rely on these automated platforms.