October 16, 2009
I just spoke with HCL America President Shami Khorana, who shared some examples of how the company's tying outsourcing pay to client business results--including the sale of Boeing 787s.India-based HCL is doing software development, testing, and other work through tier 1 suppliers for Boeing's 787 Dreamliner aircraft. The 787's a revolutionary aircraft concept, promising lower operating costs by using 20% less fuel. It also has been plagued by production delays, leading to some canceled orders. Boeing's top suppliers have a stake in the plane's success. And HCL, through one of those tier 1 suppliers, likewise has a component of its contract that hinges on how well the 787 sells. Through suppliers, HCL has some involvement on about two-thirds of the plane's subsystems, Khorana estimates.
"Customers are getting more and more demanding, and they're asking that some amount of risk be taken by suppliers," Khorana says. Khorana declined to say what percentage of its pay is tied to sales. Outcome-based IT outsourcing is another example of how CIOs are pushing harder for alternative IT approaches, in part driven by the down economy. (Download a free report on "Alternative IT: Software," based on our recent magazine cover story. Registration required) A few other examples Khorana mentioned of HCL's outcome-based outsourcing: -- One client, whom Khorana declined to name, hired HCL to develop a potential product and part of HCL's pay will be based on the product's revenue. -- HCL Axon, the SAP specialist HCL acquired last year, offers contracts with an element tied to cost-savings goals around factors such as legacy system retirement and workforce cuts, and for efficiency measures such as reduced time per call in a call center project. -- HCL, in what's now a 2-year-old deal, took over product development and support entirely for a suite of CA's security products, which CA continues to market and sell. They share the revenue. Outcome-based outsourcing is far from a brand new idea, and most outsourcers rely on it to some degree. Its use is limited in part because it's hard for CIOs to get right, since it takes a very close and mature relationship with an outsourcer, as well as measurable and relevant metrics. Khorana predicts it'll remain a small part of the IT services market--but a growing one.
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