Tuesday, March 09, 2004

Look out, outsourcers - e-commerce is making a comeback

With the burst of the dot-com bubble and the souring of Internet technology investors, large enterprises are no longer working on e-commerce projects, right?

Wrong, according to Evans Data. The research firm last week published a study which shows that e-commerce is now the No. 1 priority among IT project planners for the coming year

According to Evans’ new Enterprise Development Management Issues survey of 400 IT executives, planned projects for business-to-business e-commerce have increased 40% in the last six months, moving B2B projects from 11th place to first on enterprise priority lists. Business-to-consumer projects also showed strong gains, with developers now planning 20% more B2C projects for next year than they had planned six months ago.

"We're seeing a resurgence in e-commerce deployments, but this isn't a revival of the so-called 'dot-com' frenzy by any means," said Joe McKendrick, Evans' enterprise analyst. "Rather, many companies are extending relevant portions of their applications and data to supply-chain partners. With growing adoption of Web services and other standards, such connectivity is now possible with little additional investment. In fact, we’re finding that developers are getting more comfortable with Web services, and therefore directing more efforts beyond their firewalls, to business-to-business interaction."

While the dot-com bubble may not be re-inflated, the Evans survey clearly suggests there will be opportunities for outsourcing service providers to help enterprises on several fronts.

The first is Web services, where many enterprises have programming skills but little experience in implementation of a multi-organization application environment. Outsourcing providers should be able to serve effectively as neutral parties in these implementations, offering Web services technology expertise while helping to arbitrate disputes between partners on how to deploy B2B technology.

Secondly, the renewed interest in B2B projects presents an opportunity for outsourcing providers to re-launch their supply chain technology services, which have been largely in hiding since the economic downturn. As with Web services, an outsourcing company can serve particularly well in supply chain environments that involve many partners, because it adds technology expertise, business process expertise, and a level of objectivity to the effort.

Finally, outsourcing providers can offer assistance in development of Web site content and infrastructure that can scale to thousands of customers. This assistance is important in enterprises that do not have a great deal of B2C project experience - homegrown Web content is often untested and may be poorly received by potential online customers. A third-party audit of the content and the infrastructure that supports it can make the difference between success and failure in online sales.

Interestingly, the Evans survey suggests that while e-commerce projects present new opportunities for outsourcing providers, outsourcing of IT projects is on its way down again. Fifty-six percent of enterprises are currently outsourcing some of their IT tasks, down from 71% a year ago, the research firm said. Only 7% of companies are outsourcing a majority of their projects, down from 12% a year ago.

Like the e-commerce data, Evans’ outsourcing data indicates that the budget crunch on IT may be lessening. IT organizations are increasingly looking toward outsourcing providers for expertise, rather than manpower, which suggests that IT organizations are increasingly able to hire their own people to do the work. It’s possible that the outsourcing market is on its way back to its form of a few years ago, when outsourcers were sought more for brains than brawn.

By :Tim Wilson