A few days ago, I had the opportunity to chat with Larry Guevel, Vice President of Strategic Business Planning for Unisys Global Outsourcing and Infrastructure Services, about the current state of the outsourcing market and some of Unisys's products in the marketplace.

Given the recent news regarding Satyam, I started by asking how clients can be comfortable with their outsourcing partners and the financial data that they provide. Mr. Guevel suggested that potential clients need to do more due diligence on their prospective providers. Also, he suggested that companies consider multisourcing as a risk hedge against supplier instability.

Talking about multisourcing, Mr. Guevel acknowledged the increase in transactions costs, but also pointed out that service management tools are entering the marketplace as a way to mitigate some of these increased costs. Propagating multisourcing within an organization can be a challenge, he said, but a consistent strategy with senior management buy-in can help a company achieve this strategy effectively.

Mr. Guevel went further, describing Unisys's service management offering. In effect, this offering allows Unisys to act somewhat like the "prime contractor" in a multi-vendor environment, offering the customer a single point of contact to address service and performance issues.

I then asked if Unisys's offering is disaggregated from its traditional ITO and BPO services. It is not, he pointed out, but is instead offered as a value-add to Unisys's ITO and BPO offerings. Some services, however, can be disaggregated - for example, IT security, where best practices may call for an independent third-party to provide such services.

Our conversation then moved to governance issues - always a challenge with outsourcing deals. Mr. Guevel suggested that governance issues often arise from a divergence of interest between customers and suppliers at the outset, with customers stressing stability and suppliers seeking quick transition to profitable services. He suggested that the parties carefully construct the transition plan to ensure that their interests and incentives are properly aligned as a way to minimize this risk.

One other area that concerns many in the customer community are the significant transactions costs involved in developing an outsourcing relationship. This includes costs of third-party consultants and attorneys, and can often eat up much of the earlier savings in a deal. Mr. Guevel noted that the market has noticed this and has moved toward smaller, simpler transactions and software-as-a-service (SaaS) offerings, both of which can lower the overall transactions costs of outsourcing deals.

One ongoing concern that persists around the SaaS model is vendor longevity. Earlier in the decade, under the ASP model, many companies found themselves and their data in peril when these companies began to face financial trouble. Mr. Guevel pointed out that there are technologies currently in the marketplace or being developed that will simplify the porting of information back to the client in the event of vendor failure. These technologies can help mitigate the risk of SaaS failure, making the business case for SaaS stronger overall.

Mr. Guevel also suggested that SaaS offered one benefit that is rarely highlighted - the ability to reduce and/or share disaster recovery (DR) costs. DR is one of those areas of higher-than-expected costs in most outsourcing deals - and sharing these costs among customers.

During our conversation, Mr. Guevel highlighted Unisys's ability to manage and reduce risk to outsourcing customers through its many service offerings. I'd like to thank Mr. Guevel for his time and expertise - and I hope that my readers are able to take some of this information back into their practices.

- GMZ