A Challenge is a Good Thing
- Outsource Magazine
- On April 15, 2014
The IT outsourcing landscape is changing. This is because technology and business needs are changing at an exponential rate. In a recent edition of Outsource, I read a very interesting article that incorporated the opinions and views of a number of my peers in the outsourcing industry on what they saw as they main challenges facing the industry. I wanted to respond with what I see as the key hurdles and factors influencing ITO business strategy, and what ITOs can do to ensure they are ready to meet them head on.
For me, there are four key areas: technology; business; regulatory; and politics, society and economics.
The advent and subsequent rise of cloud computing has been a key challenge for outsourcing as it provides what businesses traditionally look to ITOs for. We are seeing that businesses like the “in house” nature of cloud and the idea that it belongs to them, despite being hosted in a data centre far away. The control that it offers is very attractive.
Tied to this is the rise of other SMAC technologies (social media, mobile, analytics and cloud). These four new technologies are drastically redefining traditional outsourcing models. To remain a key part of the supplier framework, ITOs need to build an ecosystem that encompasses suppliers of these emerging technologies; suppliers that have not traditionally been part of the larger sourcing model. ITOs need to become more partner-centric, providing end-to-end solutions to their clients, adding expertise and consultancy as a key differentiator. This will help ITOs to adapt to the changing industry environment and remain successful.
Since the economic recession, companies – even those in geographic areas that were hit less – have seen their IT budgets shrinking. The focus, more than ever, is on reducing costs, but still adding “true” value to the business. For the CIO and IT department, this has seen their role become more defined by a need to look at the end business goal of technology implementations and picking and choosing what solutions are best suited for that end business goal.
For ITOs this could mean ensuring that solutions have the end-consumer in mind and are designed to positively impact across the wider business rather than just the IT department. This is where advanced consultancy and expertise needs to come into play, looking at a business’ wider strategy to ensure that the solutions provided are tailored specifically for the individual client, rather than offering a “one size fits all” solution that gives the standard business agility, decreased downtime, decreased capex and increased efficiency outcomes. All solutions need to have these as standard, but at the same time need to ensure they take into account individual business need.
As mentioned, new technologies, particularly cloud, are undercutting traditional outsourcers, but this – combined with a greater focus on short-term commercial strategies by outsourcers that are more tactical and focus on ROI for clients as a whole – will ensure ITOs remain relevant to today’s business technology implementations.
New regulations, particularly in the financial sector, are having a significant impact on the outsourcing industry. The tightening of regulatory frameworks is posing new challenges in relation to data ownership, access and analytics. Big data analytics can offer businesses a massive opportunity to garner information and insights on their market area and customers enabling them to make more informed decisions and potentially greater profit. However, to get that information and insight, analytics needs to span across an organisation, cutting across physical and virtual locations. Due to new regulatory challenges, certain data access is limited from remote locations, making outsourcing certain technology processes more difficult.
Political, Social & Economic Factors
Macro-economic and geopolitical factors in Europe and North America in particular, as well as high domestic unemployment rates, mean that both regions are tightening their immigration controls. This has been reflected in enterprise sourcing strategies. Nearshore and in-country sourcing centres are now firmly back on the agenda, stripping ITOs of possible business avenues.
As the global economic outlook begins to recover, there is much uncertainty on how the situation will develop for IT outsourcing. Should demand outstrip in-country supply, ITOs can rest assured that their solutions and technological expertise will still be in demand, but at the same time these competitors may expand to meet demand from businesses. In the long term ITOs will face more competitors than ever before, giving rise to the need to differentiate and realign business strategy and tactics to this new emerging market.
It is fair to say that these challenges could mean a rocky road ahead for many ITOs but they can also be seen as a good thing. It is recognised that ITOs need to add in a greater level of expertise and consultancy to their customer offerings. By facing these market shifts, and adapting to meet them, the whole business landscape can be changed for the better.
This article originally appeared in Outsource magazine Issue #35 Spring 2014.
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