Continued from Page 1
Loss of corporate IT infrastructure End-users are concerned about the loss of valuable skill-sets in the event of
outsourcers not meeting their contractual obligations. In addition, end-users do
not want to find themselves trapped in an outsourcing relationship because of
the dependency on outsourcers created by the original decision to outsource.
Cultural barriers
The most successful relationships are those that have open and honest
communication channels in place to deal with sensitive political and human
resources issues. In addition, transitioned workers should be educated on the
culture of their new environment.
Lack of knowledge of the corporate business
In some cases, end-users have expressed concern that the outsourcer did not
possess significant knowledge of corporate business. This can be a big poser as
IT strategy always needs to be cohesive with the overall business plan.
A case in point
In response to changing client requirements, Computer Science Corporation
completely redesigned it’s renewal contract with Fidelity and Guaranty Life
Insurance in 1999. The new agreement, valid till 2013, is estimated to be valued
at $435 million. Services provided include all aspects of policy administration
and related IT infrastructure.
The original 1995 contract was a traditional arrangement, under which CSC
committed to a service-level-agreement and charged a fixed fee per policy. As
the contract matured, the static pricing arrangement no longer suited F&G’s
changing requirements; it wanted to introduce new products and add new user
technologies not included in the original agreement.
Together, CSC and F&G created a new agreement that abandoned service
level aggrements (SLAs) and fixed fees in favor of pricing based on "value
delivered to F&G" with a guaranteed gross margin paid to CSC. The new
model allows F&G the flexibility to be dynamic and change products to suit
the changing environment without straining its contractual relationship with CSC.
This has led to the evolution of new models, with a view to being a win-win
for both the customer and the provider.
Ishan Ranjan is VP,
projects, CMIL. He has also been founder-editor of Voice & Data.
| 
Special Issues 
