The issues and expectations of outsourcing users have changed dramatically. Ten years ago it was about scale and commercial reliability as users sought partners who could ‘guarantee’ service and delivery long-term. Now that picture has changed, as public and private sector users want partnerships that can make a real impact on both business and IT performance.
The outsourcing community is now focused on agility and innovation and delivering services both to business and technical consumers. Both service providers and their customers recognise that cloud-based services broaden the scope of what can be achieved.
The cloud makes possible a model that moves outsourcing far beyond the realm of pure cost containment. Outsourcing customers want to turn up and turn down the service they consume in line with the business rather than technology need. That allows for a very different type of outsourcing relationship from the traditional model: the risks are changing.
That’s an important development for a number of reasons. Firstly, we’ve commissioned research which shows 52 per cent of IT directors’ spend with outsourcers is still aimed at reducing IT costs, despite the fact that 48 per cent cite business generation and growth as the most critical needs an outsourcing partner can help with. A cloud-based model can help to refocus outsourcing on delivering what the customer wants, when they want it and to the business outcomes committed
Equally importantly, cost containment is simply becoming a less relevant benefit: cloud and software-as-a-service solutions are replacing the need to outsource many applications in the traditional way. As technology becomes standardised, and the opportunity to deliver ‘open’, modular, ‘as-a-service-platforms’ becomes a reality the cost differential between operating a traditional IT environment versus an on-demand business service is pronounced.
Further, as it becomes increasingly feasible to achieve dramatic cost improvement and service innovation at the same time, an outsourcing solution focused solely on costs is becoming a much less attractive offer.
It’s for this reason IT professionals across the public and private sectors are interrogating more thoroughly what outsourcing can deliver to their organisations through a flexible cloud-based, ‘as-a-service’ model that negates the need for outsourcing large numbers of people and systems to deliver an optimum service.
It does however mean that the management of the risks are changing: it is no longer the supplier that carries majority of risk for the delivery of the service. Increasingly the risk will lie with the customer and their ability to manage all the moving parts, to make decisions on what to increase and decrease – based on the outcomes they need to deliver to their customer.
Traditional outsourcers now recognise they need to tailor their service to the new demands of their customers. They understand they need to provide a “turn up, turn down” service that delivers clear, and evidence-based business value. They are much more focused on the need to innovate to address the complex needs of business and IT users. And they need to provide evidence in a non-technical language about what they are achieving.
The cloud enables service providers to shape their offering according to what is the most effective route to meet the customer’s priorities. Ultimately, the real success will come from both delivery of the service and also the capability for them to understand, evidence and manage the service to the outcomes required.
As the model evolves and the risks change, those that succeed will need to understand how all moving parts are affecting what the business wants to achieve and how changes in one part of a business can affect the rest of the organisation. Our research shows there is work to do if this challenge is to be met: many businesses are not speaking the same language across departments internally, let alone with their outsourcing partners.
It’s the nature of this challenge that makes this an exciting time for service providers. A new model that broadens what outsourcing offers and places increased emphasis on enabling businesses to realise their goals can turbocharge the value placed on providers’ offerings.
It will be up to the outsourcing community to demonstrate it can meet those challenges, offering focus on measurable business needs over cost-cutting. It also needs to provide insight into how its solutions are impacting what’s happening in the business in a language that both business and IT users can understand.
Life has changed dramatically for the outsourcing community in the last decade. The days when the largest organisations dominated outsourcing are passing. The increased success of more agile providers – able to advise and act on insight into complex moving parts within their customer organisation – is just beginning.