The outsourcing market should be all about building a viable global delivery model, and no longer thinking about 'offshoring' and 'outsourcing', believes Cognizant VP and UK country manager Sanjiv Gossain.

“We believe the future of the market is the fourth-gen, global delivery model, where there is strong collaboration between client and service provider; a joint planning process; insight into what's happening in the client's business, and dynamic commercial models,” he said.

At the FT Outsourcing Conference in London this week, Gossain said that while people still consider pricing when signing a deal, that is shifting towards business alignment, innovation and transformation.

He added: “It's not about people to revenue, but about value delivered to the business. That's what's important about this fourth-gen model, and it will be delivered from multiple locations. Where doesn't matter to the end customer.” Transaction-based pricing will become more dominant, he said.

Cognizant is certainly evidence that captives can take up the challenge of becoming fully fledged outsourcing businesses: the company was formed as a captive of Dunn and Bradstreet some 40 years ago, and now boasts 35 delivery centres in India, Brazil, eastern Europe, Shanghai, and elsewhere.

Gossain claimed that the economic downturn is an opportunity to – essentially – slash internal IT functions and move the responsibility elsewhere – a bold claim given that many enterprises baulk at the uncertainty and upheaval of building a new relationship during a credit crunch, especially to a provider that promises to innovate more than reduce costs.

“There are a lot of opportunities in tight economic times for customers to transition their IT footprint,” he said, advising clients to “reduce the amount spent on keeping the lights on and more on adding value. The customer focuses on 'core', the provider focuses on 'context'”.

“Cost reduction is not the primary driver anymore,” he continued. “Decisions are not just based on financials and the quantitative aspect. Beyond that it is about cultural fit. It is about how you as customer and provider get along. That is a more and more important part of the due diligence process.”

Gossain said that the reasons for outsourcing relationships failing on the provider side are a lack of flexibility, cultural misunderstandings (both business and regional), and not understanding the business. “There is an increasing emphasis on relationship. You don't live and die by the contract. You have to be in it for the long haul. Think about the outcome you want to have; establish a joint vision and come up with measurable objectives. It's about defining and documenting processes; strong sourcing governance, and cultural fit.”

“Go the extra mile if need be,” he advised providers. “You live and die by the way you work with the customer.”