Outsourcing Goes Bite-size

When it comes to outsourcing deals, smaller is better. Last week Gartner released research showing that the future of outsourcing deals is moving toward smaller agreements with specific business objectives. Based on its recent report, "Predictions for Outsourcing in 2004," Gartner now estimates the number of enterprises overall that enter into new outsourcing relationships will increase by 30 percent in 2004. That is a shift, since for many years outsourcing deals went by the bigger-is-better theory, where full-service, decade-long, multibillion dollar deals prevailed. Gartner says both large and small external service providers will benefit from this trend as more opportunities open up. According to Linda Cohen, managing vice president for Gartner, each service provider will have its own domain--small vendors will compete in specialized niches, while large ESPs will need to focus on their core service offerings and differentiating their business value. Cohen cautions that even as more enterprises outsource operations this year, not every enterprise is adequately prepared to manage and execute these programs successfully. Gartner advises corporations signing outsourcing contracts to involve senior level executives. Enterprises are continuing to decide what must be managed in-house versus can be outsourced. Processes that are being classified as support services (IT, HR, and customer care) can be outsourced. That's why Gartner's research shows the main growth areas for 2004 include IT, human resources, customer care, finance, accounting, and procurement.