IT outsourcing brings more flexibility

THE ECONOMIC crisis has helped companies that provide IT outsourcing: their existing and potential clients have become more cost-sensitive and have started searching for ways to optimise costs which reach beyond internal solutions. But IT outsourcing is not only about cost cutting: it enables companies to use the services of talented and experienced people clustered in IT outsourcing centres and allows them to adjust the IT services they consume to their current needs in a more flexible way.

The Slovak Spectator spoke to Martin Kohút, director general of NESS Slovensko, and Rastislav Koutenský, director of the IT outsourcing division at DATALAN, about the latest trends in IT outsourcing and the impact of the economic crisis on the IT outsourcing sector.

The Slovak Spectator (TSS): What are the current trends in IT outsourcing in Slovakia?

Martin Kohút (MK): Our customers are mainly clients from western Europe and the USA and thus we primarily observe ‘foreign’ trends. However, during the most recent period we have also registered an interest from Slovak customers. But compared to the above-mentioned countries this is only in the early stages and customers operating in this market are not prepared yet for such cooperation. In short, the circumstances have not forced them to utilise this sort of competitive advantage. But that time will certainly come.

Rastislav Koutenský (RK): Many companies are interested in IT outsourcing because of cost reduction, which during an economic crisis is particularly topical. But cost cutting is far from being the only advantage of outsourcing. Equally important is the opportunity to vary the scope of consumed services, or increase their quality, or change the type of IT services without the need for large financial investment. However, outsourcing is not a divining rod and without a responsible approach by the customer it cannot function effectively and with high quality.

TSS: How has the current crisis changed the attitude of companies towards outsourcing their IT processes?

MK: The crisis has helped us in the IT outsourcing segment. Global customers especially, those who use the services of our subsidiary NESS KDC, have tried to transfer more work to us with the aim of optimising costs. It is now possible to feel a considerable revival and there are indications that the market will even grow this year. This is linked with the exhausting of possible internal solutions, so companies are searching now for more strategic approaches and utilising the advantages of outsourcing to a greater extent.

RK: During the economic crisis companies have been facing strong pressure to reduce internal costs and increase the effectiveness of their services. It is precisely the outsourcing of IT and related services that enables companies not only to cope quickly with internal costs but also to vary their services according to current needs. Another reason is the need to reduce the number of employees, or organisational changes in a company.

TSS: Has the crisis brought a change in the demand for services in IT outsourcing? In what services do your clients have the biggest interest – and in what services has demand decreased?

MK: Even the outsourcing segment did not escape the so-called ‘waiting’ phase, but it has already returned to where it was before the crisis began. This is because our clients are companies dealing with software development and offshore/nearshore for them is the choice between survival and gaining a competitive advantage.

However, it is not only the price of labour that is the main factor in their decision-making process. It is also talent, which here is still more obtainable for our clients than in western countries.

RK: We can divide the interest of clients into two types of services. The first segment are regular or permanent services – i.e. services needed for the functioning of a company, for instance IT administration, support of end-users and so on. The second segment includes project-oriented services linked to a change or a project in a company, i.e. services defined for a certain period of time with the aim of reaching a specific target. Here specialised forms of outsourcing, for example body leasing, are also used.

TSS: Apart from reducing costs, what other advantages can IT outsourcing bring to a company?

MK: Apart from optimising costs, more flexible access to resources, for example talented people, is a motivation for outsourcing services. There are talented and quality people with a wide range of vision and multiyear experiences working in outsourcing centres. Based on outsourcing, companies can use resources from around the globe. We work via our subsidiary NESS KDC for leaders from various sectors who have a global scope of operation.

RK: Apart from cost reduction, there is the large advantage of variability. Under a well-defined model of IT outsourcing, a company can consume services to the extent it needs and which follows the performance of its core business.

Thus, during periods of decline it can significantly reduce costs and, vice versa, during periods of expansion (for instance when getting a large order), it can very easily increase the volume of consumed IT services needed for realisation of an order without the need of large one-off investments.