LONDON, September 19 /PRNewswire/ -- CEOs in the process of evaluating new outsourcing partnerships should look beyond physical resources such as people and technologies and concentrate instead on companies' ability to turn those resources into capabilities such as leadership, behaviour management, governance and process improvement. This is the main finding of a new research-based whitepaper by Leslie Willcocks, Professor of Technology, Work and Globalisation at the London School of Economics and sponsored by LogicaCMG, a leading IT services company. The whitepaper also highlights the risks associated with the 'winner's curse' - deals that excessively favour the client at the expense of the supplier but do not work to the client's advantage in the long run.

The whitepaper identifies twelve capabilities that supplier companies should be able to display from the outset that can be combined to create high-level competencies to achieve business benefits for the customer. They include the capability to retain and apply professional knowledge, the ability to access resources as needed and the aptitude to design and implement successful organisational arrangements.

Professor Willcocks warns CEOs not to choose suppliers on cost alone. "Many of the organisations that we analysed for the whitepaper discovered hidden costs later into the contract. While the supplier might provide lower costs, competencies such as adding value to processes or managing governance typically remain the responsibility of the client company. The original benefits gained through lower rates were subsequently eroded by the cost of management time required to fix problems further down the line. This so-called 'winner's curse' affects as many as one fifth of all contracts." (1)

In order to avoid the 'winners curse' and select the most suitable outsourcing partner Professor Willcocks believes that there are three key competencies that successful suppliers should demonstrate: "The twelve capabilities that suppliers should exhibit can be categorised into three main competencies. The first is a delivery competency based on the supplier's ability and willingness to respond to a customer's day-to-day operational needs. The second is a transformation competency based on the supplier's ability to deliver radically improved services in terms of cost and quality. And the third is a relationship competency based on the supplier's capacity and willingness to align itself with the customer's values, goals and needs. This is by far the hardest competency to find in a supplier."

Andrew De Cleyn, global sales and marketing director, global service delivery at LogicaCMG comments: "The report highlights that successful outsourcing is not about getting the lowest price at all costs. It is about getting the lowest price for a sustainable solution under a fair contract from a superior service provider. Outsourcing providers should be able to deliver global capabilities, utilising offshore, nearshore and onshore facilities, which can be blended to give the most appropriate mix of skills and infrastructure to meet the customer's individual imperatives."

In addition, the white paper - which was co-authored by Sara Cullen and Mary C. Lacity - makes some key predictions for the outsourcing market in the future:

- Large global suppliers will have to reposition themselves

- ITO suppliers will increasingly diversify into BPO

- Major global and Indian suppliers will increasingly emulate one another

- Large global suppliers will increase the number of low-cost captive centres

- Large Indian suppliers will invest profits to develop higher-valued services

- 'Near shore' suppliers are well placed to increase sales

- Alliance supply networks such as prime contracting and best-of-breed will become the norm as opposed to 'one-stop shop' suppliers.

- Large global suppliers will increasingly target middle market customers

- Suppliers will have to engage with more customers involved in lower value deals

- Suppliers will increasingly use 'netsourcing' to lower delivery costs

- Clients with second and onward generation deals will be more likely to put deals to competitive tender

- When selecting providers, clients will look deeper into each organisation than just its technical expertise

(1) Strategies For Avoiding Relational Trauma. California Management Review, 44, 2, 47-69. A 2002. The study of 85 contracts found the 'winner's curse' came into play in nearly 20% of the cases and that in over 75% of those cases it was also visited on the client

To download the report, please go to the following link: http://www.logicacmg.com/uk/350236490

Notes to Editors

About the whitepaper

This whitepaper, which is entitled "The CEO guide to selecting effective suppliers", is the third to be released as part of The Outsourcing Enterprise series of white papers targeted at CEOs, that draw on a series of interrelated research studies conducted by Professor Leslie Willcocks, Sara Cullen of Cullen Group and Dr. Mary C. Lacity of the University of Missouri, St. Louis, three leading authors on outsourcing. The findings are sourced from over 1,200 organisations located throughout Europe, the USA and Asia along with ongoing, un-published research. The Outsourcing Enterprise series, sponsored by LogicaCMG, provides leading edge thinking from the perspective of the Chief Executive and suggests the nature of the involvement the CEO should have, as well as those issues which should be considered in order to ensure the success of an IT or Business Process outsourcing decision. The two previous whitepapers is this series are:

1. "The CEO role in delivering strategic advantage", published July 2005

2. "The power of relationships", published November 2005.

The research base used for this third whitepaper, of 450 sourcing case histories held by the researchers at Warwick, Melbourne and Missouri, St. Louis Universities, covers all major economic and government sectors, including financial services, energy and utilities, defence/aerospace, retail, telecoms and IT, oil, transportation, central, state and local government, health care, industrial products and chemicals, and is drawn from medium, large and multinational organisations based in Europe, USA and Asia Pacific.

About the Authors

Leslie Willcocks has an international reputation for his work in outsourcing, IT and change. He is Professor of Technology, Work and Globalisation at the London School of Economics, and also Associate Fellow at Templeton College, Oxford, Visiting Professor at Erasmus and Melbourne universities, and Editor-in-Chief of the Journal of Information Technology. He has written twenty-five books and over 160 journal articles. In 2001 he won the PriceWaterhouseCoopers Michael Corbett Associates World Outsourcing Achievement Award.

Sara Cullen is the Managing Director of the Cullen Group, which offers consulting, training, and advice on commercial agreements. A former partner at Deloitte, she received her PhD from Melbourne University in outsourcing. Dr. Cullen has acted as a consultant for 87 private and public sector organizations in 51 countries on 116 outsourcing projects with contract values of up to $1.5 billion per year. She has conducted seven government reviews and been featured in more than fifty articles in addition to carrying out research with universities that include the London School of Economics, Melbourne, Oxford, and Warwick. She has written twenty-five publications including Intelligent IT Outsourcing.

Dr. Mary C. Lacity is Professor of Information Systems at the University of Missouri-St. Louis, Research Affiliate at Templeton College, Oxford, and Doctoral Faculty Advisor at Washington University. Her research interests focus on IT sourcing, privatisation, relationship management and project management. She has conducted case studies of over 100 organizations and has surveyed the practices IT managers in both the US and Europe. She has written more than 50 articles and six books, most recently Global Sourcing of Business and IT Services, and Netsourcing Business Applications. She was the recipient of the 2000 PricewaterhouseCoopers Michael Corbett Associates World Outsourcing Achievement Award.

About LogicaCMG

LogicaCMG is a major international force in IT services. It employs 30,000 people across 36 countries. LogicaCMG's focus is on enabling its customers to build and maintain leadership positions using LogicaCMG's deep industry knowledge and its track record for successful delivery. The company provides business consulting, systems integration and IT and business process outsourcing across diverse markets including telecoms, financial services, energy and utilities, industry, distribution and transport and the public sector. Headquartered in Europe, LogicaCMG is listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE: LOG; Euronext: LOG). More information is available at www.logicacmg.com.

Press contacts: Isabell Horvath, +49-(0)-89-65112136, Mobile: +49-(0)-171-6546152, isabell.horvath@logicacmg.com