How to Adapt Your Sales Approach to the Outsourcing Market

By Geoffrey James

For the past five years outsourcing has been an increasingly important aspect of many large corporate software sales. With companies giving more attention to TCO and ROI issues, outsourcing has seemed an attractive way to save IT dollars. This trend complicates the job of software sales reps, who now must not only sell a solution to a primary customer, but also sell outsourcing services either supplied by the vendor or by a third-party vendor partner.

Software sales involving outsourcing are about to become even more complicated, according to a recent study conducted by the market research firm IDC. The study reveals fundamental changes taking place in the outsourcing marketplace, including a dramatic shift to more business process outsourcing (BPO), an increase in the number of players providing outsourcing services and a reduction in total deal value for the typical outsourcing engagement.

According to IDC, the value of the top 100 outsourcing deals in 2004 decreased by 1.2%from $69.1 billion in 2003 to $68.3 billion in 2004. Thus, if your sales model depends on outsourcing you’ll have to cut more deals, on average, to make the same amount of revenue. To do this you’ll probably have to seek new small- to medium-size business (SMB) customers.

Furthermore, outsourcing deals increasingly are likely to involve BPO which, because it deals with the fundamentals of how a company runs, is the most complicated type of outsourcing to sell. The study found the share of BPO and processing services in the top 100 outsourcing deals increased from 15.2% in 2003 to 25% in 2004, while the share of IT outsourcing services suffered a 75% decline from the 2003 market.

To address the BPO market, software firms will need to include additional service capabilities and offerings in their product mix. Software firms also will need to partner with non-IT groups, such as management consultants, who can work the organizational issues inherent in BPO engagements. Here are the three key steps your company must take to competitively pursue these BPO opportunities.

1. Create a higher level of partnership with your outsourcing customers. According to IDC, when the relationships between the buyers and providers of BPO services are structured as true working partnerships it is possible to achieve key benefits around value creation and the advancement of strategic business objectives.

2. Create a strong value-driven case for your software and services. Based on numerous case studies, IDC observes that successful BPO agreements involve situations where company executives feel their firms gained distinct value from their BPO engagements, including the ability to achieve regulatory compliance, the launch of entirely new businesses and subsidiaries and the development of entirely new revenue channels.

3. Deepen your focus on globalization. IDC notes that the issue of globalization has taken on new meaning and relevance for many businesses. BPO services have helped these organizations address issues related to the globalization of workforces, the need to support globally distributed client bases and the opportunities created by the expansion of regional trade frameworks that have facilitated the adoption of BPO services.