Your primary goal when negotiating and structuring an outsourcing contract is to develop an agreement that achieves your business objectives, not just on day one but throughout the entire term. To do this well, you must understand the overall construct of a good outsourcing contract and make certain you balance the overall risks and rewards in order to receive the services you need at the levels you require and within your price constraints.

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The entire value chain for consumer products sourced or manufactured in Asia has become increasingly interconnected and mutually reliant—ownership of physical manufacturing assets and intellectual property rights has become more ambiguous and contentious. With ambiguity over ownership and rights to manufacturing assets, customers lose the key leverage of mobility. While brand companies were able to become more price competitive through lower production cost and reduced overheads within their own organizations by outsourcing their design engineering and manufacturing to Asia, their supply chains became longer and, while some new problems are obvious, others remain latent, only to emerge when the relationship breaks down.

Brand Companies

With greater reliance on suppliers in China to design their products and to finance their tooling and inventory, brand companies have found themselves more and more “married” to their suppliers. As a result, Brand companies find themselves directly and indirectly facing the same challenges as their suppliers: currency and commodity volatility, product quality and labor issues.

Brand companies are using the lowest-cost suppliers who themselves often employ unsophisticated purchasing, finance and management practices. As a result, the brand companies are receiving price increase requests from their suppliers on a monthly and sometimes weekly basis as their suppliers struggle to properly manage these issues. Suppliers that are facing these problems have been known to essentially suspend taking orders unless they get the price increases—bringing the supply chain to a grinding halt. Brand companies have an unenviable dilemma: either take the increases and the hit to their margins, or face the daunting prospects of trying to change suppliers during the product life cycle.

Poor product development processes in place between brand companies and their distant suppliers have given rise to three major problems: unclear responsibility for product quality, delayed product realization and ambiguous ownership of protectable intellectual property rights. Supplier financing of tools and lack of clear assignment and licensing of intellectual property can make it cost-prohibitive or impossible to change suppliers when things get tough in the relationship.

Because Chinese suppliers make up such a large portion of most brand companies’ cost of goods, brand companies are pressured to take into account additional concerns such as their suppliers’ environmental and social compliance (ethical) practices.

Finally, corruption continues to be a major issue in China, and brand companies need to be both proactive and vigilant in their management of this issue. Brand companies need to establish clear expectations for their staff and suppliers and adopt policies for doing business with suppliers that engage in corruption, including termination of the business relationship. Brand companies need to structure their affairs with their suppliers so that they can quickly move away from a supplier that engages in untoward business practices.

Manufacturers

As a result of their enhanced roles and capabilities, manufacturers find that they have new leverage in the relationship as well as a heightened awareness of the need to protect their interests and investments. Manufacturers also realize that Chinese non-legal dispute resolution solutions do not adequately meet their needs when dealing with overseas customers. As a result, Chinese suppliers are warming to the idea that manufacturing outsourcing services agreements are not just tools for their customers to control them, but with their new-found leverage, are a means to protect their own interests.

Many Chinese manufacturers today have further taken on advanced marketing services for their customers, including, in some circumstances, to “category management” ranges of products for their customer’s product portfolio. Some suppliers have even greater ambitions—to develop and sell their own brand of products both domestically and abroad.

As a result of increased reliance on manufacturers within the value chain and the investments made by brand companies to improve their manufacturers’ capabilities, brand companies have created a new set of their own competitors that, on their own or in collaboration with retailers, are increasingly well-positioned to chip away at the brand company’s market share and margins.

Retailers

Retailers (those remaining) have strengthened their positions greatly in past 20 years. Retailers now have two sets of suppliers to choose from: brand companies and Chinese manufacturers. A growing share of high-volume, low price-point products are being sourced directly from Chinese manufacturers, further putting pressure on product marketing companies.

Conclusion

Dramatic changes have taken place in the supply chain over the past 20 years, and manufacturing and product development services agreements used in today’s environment all too often do not adequately contemplate or address either the obvious or the latent issues present in this new highly-integrated, mutually-reliant value chain. Manufacturing agreements in use today are often based on the 1990s model of distinct responsibilities of the parties with a relatively simple range deliverables of Chinese manufacturers with a narrow focus on the product, rather than the basket of services now on offer (and often provided).

Supply chain contracts need to address the distinct, discrete services performed by the manufacturer, and adequately protect brand companies’ interests. In the absence of contractual coverage addressing these issues, the current trends tip balance of control in the supplier’s favor and raise an ever-increasing list of issues for brand companies to address without the proper tools.

Low-cost country manufacturing is here to stay. The myriad of issues and challenges that exist will increase, and all players in the supply chain will struggle to adequately control them.

Robust manufacturing and product development outsourcing services agreements should proactively address the new order problems that are emerging in the brand company Chinese manufacturer relationships. A thorough discussion and agreement addressing key issues and providing flexibility for growth and change can keep the relationship balanced and allow the brand company to maintain reasonable options.

Geof Master is a partner in Mayer Brown JSM’s Business & Technology Sourcing practice. He can be reached at geofrey.master@mayerbrownjsm.com

Tom Keenan is a Registered Foreign Lawyer (Victoria, Australia) in Mayer Brown JSM’s Business & Technology Sourcing practice. He can be reached at thomas.keenan@mayerbrownjsm.com

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It’s hard to believe that when the first commercial cell phone was brought to the market in the early 1980s, anyone could have predicted the impact mobility would have on the world.

“In many ways, mobility has the potential to have as great of an impact as the invention of the wheel,” said Seema Ghanekar, head of mobility for L&T Infotech. “The wheel enabled people to move between places efficiently. Mobility enables people to be virtually present anywhere and at any time. Both innovations altered the way we work and live. As far as mobility in the corporate enterprise is concerned, mobility enhances the fidelity and expediency of informed decision making. ”

Devices have rapidly evolved – becoming smaller, more powerful and more affordable. Network speeds continue to increase. But, one of the biggest drivers in today’s mobility is more emotional in nature; namely, the importance consumers now attach to their devices.

“The amazing thing about smartphones is that they are always with you. Everyday, I leave home with my keys, my wallet and my phone. If I forget my wallet, I may not go back for it. But, if I forget my smartphone, I’m definitely going to turn the car around,” said Steve Roth, senior director and mobile product manager for ADP.

Companies are now ramping up to take full advantage of this mobile phenomenon. After spending the previous year identifying how to manage a multitude of employee-owned devices, setting policies and keeping company data secure in a virtual world, corporations are now exploring how to engage mobility to do everything from reducing costs to increasing sales.

“Enterprise-level mobility adoption is changing in a fundamental way,” said Dr. Satya Ramaswamy, vice president and global head of the Mobility Solutions Unit for Tata Consultancy Services. “In 2011, many enterprises were in trial mode when it came to applying mobility to their businesses – both internally and on the consumer-facing side. Today, these companies are engaging consultants to look at their complete value chain and come up with comprehensive roadmaps for transforming entire business process flows.”

Let’s take a look at some of the dominant trends.

It’s Not Just for Email Anymore

Email in the office to email everywhere was the baby step in what’s become a full-scale sprint in the mobile enterprise evolution. Company app stores are becoming the norm, chocked full of downloadable applications nestled securely behind the firewall.

“We’re seeing a lot of interest in applications that push analytic and customer data directly to the mobile sales force,” explained Darren McGrath, global product marketing manager for Mobility, HP Enterprise Services. “For example, while a salesperson waits for an appointment, he or she can quickly access that prospect’s history on a mobile device – from what was discussed at the last meeting to the name of the prospect’s kids. Anytime you can push meaningful information to your employees, in short, digestible data bites, you improve productivity and performance.“

Companies with remote field workers, like plumbers, electricians or appliance repair firms, are turning to mobility for workforce optimization.

“In these types of businesses, it’s essential to get the right people with the right equipment to each customer call,” Roth said. “There’s a huge ROI if personnel can solve the customer problem on the first visit. Return trips waste time, gasoline and cut into profits.”

Through applications that take advantage of a mobile device’s built-in GPS features, dispatch can track employee location, push out daily schedules and instantly change next-call information to accommodate client emergencies or cancellations. When the call is completed, the employee can finalize the invoice, email a receipt, and move on to the next destination – all without the usual paper shuffle.

But, today’s enterprise applications aren’t limited to road warriors alone. Outsourcers are working with organizations on something for nearly every type of employee, from the executive suite on.

“We’ve seen a number of requests for mobile enterprise applications, like Leave, Travel and Order approvals, which connect to enterprise back ends, like PeopleSoft and SAP. Manufacturers have a number of tasks that are right for mobile, including inventory and materials management and production tracking,” Ghanekar said. “We’ve also developed some interesting applications for a leading U.S.-based client in the entertainment industry that enable collaborative reviews of videos and documents through mobile devices.”

A New Kind of Customer Engagement

But, what about the company-consumer connection? How can this new, vibrant channel be used to market products and services effectively? The answer is not mass marketing, but finding ways to personalize messaging and add value to the customer experience.

“If implemented with care, the smartphone channel can become a powerful and indispensable connection between a company and its customers,” Ramaswamy said. “For example, we helped a major paint manufacturer in the U.S. develop a mobile app that lets consumers take pictures of items in colors they like. The application analyzes the colors, lists the closest-matching paint names, and directs the consumer to the nearest retailer with those paint colors in stock.”

Consider the traditional discount programs, where a specific retailer offers discounts to the employees of specific large companies. Every week, these employees receive an email detailing the discounts, and a list of participating retailers. Now, when you apply a little mobile innovation, the dynamics change.

“What if, instead of getting these emails at work, I could see the offer on my phone when I drove by or walked into a participating retailer? That could make marketing more interesting,” Roth said. “I think, in the future, we’ll all have the option of creating our own profiles, accessible to designated retailers. Based on analytics, retailers will push out special offers to you, and continue to refine these profiles based on your response. It’s one-on-one, totally customized, mobile marketing. “

Not only can the consumer get product information, and even compare prices on a smartphone, but he or she will soon be able to use the phone to pay for that product, even if it’s purchased in store. Near-field communications, or NFC, allows connections between devices in close range to facilitate both person-to-person and traditional retail payments. In a retail setting, a digital reader in store scans a barcode displayed on the customer’s smartphone screen. That barcode is linked to a credit card, bank account or other payment vehicle.

Will people really trust the smartphone as a payment option? All indications say “yes.” A well-known, U.S.-based coffeehouse started offering a mobile payment app as a more convenient way to make purchases than its ever-popular reloadable card. In just one year, this retailer logged 26 million purchase transactions via user smartphones. No one can say if it was the novelty of the payment option or the demographic of this company’s customer base that drove such a huge response. But, it does indicate that smartphone users are ready for and open to change.

Anticipating What’s to Come

While it’s true that companies should get serious about their mobile strategies today, going mobile for mobile’s sake is not the answer.

“Every company has to look at what makes the most sense for them; to identify areas where mobile apps can bring the most value, “ McGrath said. “Then, they have to make sure have the IT environment to support the initiatives they’ve identified.”

In the future, our experts agree: expect more rapid change. Significant advancements in mobile device processing power, bandwidth connectivity and continued mobile adoption are all on the horizon.

“Seamless broadband connectivity at speeds nearing half a gigabit per second, when coupled with quad-core processors running at two GHz and above could be quite transformational, enabling all of us to hold super computing capability in the palm of our hands,” Ramaswamy said. “This will enable widespread use of voice-enabled applications that flawlessly understand natural language commands, and enable artificial intelligence to benefit everyone in ways we never imagined before.”

Although no one can predict the future, one thing is for certain: the static world is ancient history. The era of mobility is upon us and will continue to change the way we work, the way we live and the way we interact with the world around us.

It’s the modern day wheel that’s going places – and taking all of us along for the ride.

Definition: “Cloud computing provides on-demand network access to a shared pool of configurable computing resources that users can rapidly provision and release with minimum client or provider interaction.”

“I think there will be an explosion” in the near term, predicts Steven Morris, senior business architect, business architecture + transformation for Wipro. Mike Capone, CIO of ADP, says “we are at an inflection point.” He says “even the hold outs are pushing things into the cloud because the economics make so much sense.”

By 2016 Abhay Chitness, CTO of L&T Infotech predicts “almost all enterprises will want to put their core applications in the cloud.”

When will the tipping point happen? Chitness predicts “when cloud-based offers priced at a fraction of the cost threaten established players like SAP and Oracle.”

Why now?

• Speed. This is the primary driver, according to Koushik. “Clients ask us, ‘How can I bring products to market faster? How can I develop applications to improve the customer’s or citizen’s experience faster?’” he reports.
• Consumer pressure. Morris of Wipro points out people used to smart phones and iPads believe that kind of mobility is preferable. “Business users are starting to ask why can’t I get my expenses on my iPhone? Why do I have to be tethered to a corporate computer?” he reports.
• Cost. Always a factor in outsourcing

Who will benefit?

In the short term, Chitnis says small-to-medium businesses will benefit from using software as a service (SaaS) and business processes as a service (BPaaS) more than large enterprises. That’s because large businesses typically don’t have standardized business processes, preferring to customize their apps. Companies “must standardize before they can leverage the cloud,” he says. Customizing a SaaS application is costly and can create “another set of monsters.”

Instead, large enterprises will turn to private clouds “to optimize their internal information.” Chitness predicts buyers will want a seamless experience including:

• A single sign on
• Secure data
• Consolidated billing
• The ability to review SLAs across various solutions
• Single help desk
• Documentation management
• An integrated platform for data

What will move to the cloud?

Trowbridge of Alsbridge says the early adapters moved easy processes like email and contact management to the cloud. Koushik, who is responsible for cloud, mobile and modernization services at HP, says work force tracking is another good process to test the waters. “You can move these processes to the cloud quickly,” he says.

Trowbridge notes in the near term the recommended methodology is to complete a series of pilots using specific point-to-point solutions. “Then work your way from there,” he suggests. Shantanu Ghosh, senior vice president, Genpact, agrees that at the outset “there will be a steep adoption in point solutions.” He also says enterprises will carve out specific parts of a business process before they send the entire process to the cloud.

The Alsbridge executive adds a good way to learn how to work in the cloud is to start with a new line of business. Ghosh of Genpact says starting something from scratch is the easiest way to implement cloud solutions; “trying to change a legacy model is much harder,” he observes.

Morris of Wipro predicts “we will see more of what’s inside the organization move outside.” He says companies have been talking about it since there has been a cloud but he predicts “a large scale migration” in the near term.

For example, Morris predicts integrated business planning will be one function slated to move to the cloud in the next 24 months. Sales directors want integrated information from both sales and production when they ask, “How are we doing this quarter?” He says this is difficult to do because the company has to be able to draw the data from divergent sources. Koushik of HP adds that companies will want to “loosely couple their applications in the cloud.”

Capone of ADP agrees that “companies will run both core and mission-critical applications completely in the cloud” in the near term.

Chitness of L&T Infotech says buyers will use SaaS solutions in isolation in the near term. Platforms will mature in the longer term, he adds.

Koushik of HP says many companies “are fascinated with mobility.” “They want their applications to work any time anywhere on mobile devices. This requires a seamless integration with cloud-based services,” he continues.

What may never go to the cloud

The Wipro executive believes there are some functions that will never move to the cloud: Things that are super niche. Nuclear waste management is one example. “I can’t imagine anyone wanting an app for that on their iPhone,” he says.

Chris Pattacini, director of Alsbridge’s ProBenchmark, estimates today up to 15 percent of any enterprise’s applications are non-standard, which makes them not cloud-ready. “Not every application can be delivered through a cloud solution. That means IaaS can only cover a portion of the buyer’s needs.” He says applications that follow a standard industry stack (such as Windows) are the best cloud candidates.

Pattacini says industries with “industrial-strength regulations” often have issues with security and back-end integration requirements that cloud solutions just can’t address currently. However, he predicts that over time cloud offerings will mature and “provide the security and the other services these customers need.”

Issues

1. Security. These include data encryption, isolation and authentication plus the worry of malicious attacks. “We have to tackle these issues and develop confidence in the buyer’s mind,” says Chitness of L&T Infotech.

Application developers can do this by now “consciously thinking about security.” Before the cloud, nothing left the walls of the enterprise. Now developers “have to architect security into their application,” says Koishik of HP. Since this is now happening, he doesn’t think security “will be an inhibitor to cloud growth” going forward.

However, Chitness says part of the security issue is pure perception. “Is this data I really need to worry about?” he asks. He proposes corporations classify their data and only worry about info that needs to be highly secure.

2. The changing role of the IT organization. Koushik of HP says departments can go to an application service provider directly and bypass the IT department. “The IT people are scratching their heads and wondering what their new role is. This is an evolving discussion,” he says. He predicts these pressures will cause “the role of the IT department to change” in the next two years.

One new skill they will have to hire is an integrator. And Koushik thinks the CIO of the future “will be more of an IT broker than a builder of IT services.”

3. Interoperability. Capone of ADP says “this is a big issue.” He notes companies want cross-platform reporting. Koushik of HP adds that companies want to get away from an IT environment built of components. “Today the environment has to be a lot more nimble and much easier to use,” he posits.

4. Risk management. New questions arise as BPaaS becomes more commonplace. Koushik of HP says enterprises have to look at business continuity and risk management differently. And “what happens when something goes wrong?” he wonders.

5. The need to archive. Pattacini of ProBenchmark says cloud providers will have to archive data that users can then audit or search for legal recovery.

6. Change management. Chitness adds enterprises have to make business processes “ready for the cloud.” This may mean changing the way they do business. “Adopting cloud technology does involve change management,” he points out. And without good change management policies, moving to the cloud will be like any other outsourcing: it may have as many failures as successes, predicts the L&T Infotech exec.

The view three to five years out

Koushik of HP believes “the true power of the cloud” will happen in this time frame because then providers will be able to help their buyers “integrate across the enterprise.”

He believes the cloud computing phenomenon “will reach its full potential when we think about it producing business outcomes.” Outsourcing buyers will ask different questions. Instead of trying to find Java programmers for $55 an hour, they will ask, “What’s it worth to enter a market three months ahead of our competitors?”

Both buyers and providers need this longer term to determine the correct unit of consumption so service providers can charge buyers appropriately. The HP executive uses loan processing as a service as an example. Is the unit of consumption the number of loans written or the number of calls answered?

An opportunity for outsourcing buyers

Ghosh of Genpact says buyers for the first time have the opportunity to leverage a solution that combines:

• Analytics
• Cutting edge technology
• The ability to improve process performance

“Cloud is a game-changer for buyers,” he says. Cloud especially changes their investment paradigm, he adds.

An opportunity for service providers

Morris of Wipro adds that business user pressure will create new opportunities for outsourcing providers. He says corporate IT departments are becoming swamped with requests for such applications. Whatever they write, it will have to work on iPhones, Android phones and Blackberries. “The easy answer is for them to go to a provider who has done this before,” he believes. This becomes easier yet if the service provider is already running the company’s back-end systems.

The only thing that we know for sure “is this space is changing rapidly,” says Capone of ADP. “There are no easy answers,” concludes Ghosh. “But we will see a lot of progress.”

Why now? N M Sarma, head, knowledge services, Tata Consultancy Services (TCS) says the global economic environment is changing the way corporations conduct business. Today enterprises:

• Have higher expectations of faster returns on investments made in the short and long term
• Face intense competition, shorter time-to-market and demanding customers; all drive up the cost of customer acquisition and retention
• Must comply with increasingly stringent regulatory requirements
• Need to adapt to changes in the demographic mix with the emergence of the millennials as a consumer group and Web 2.0 and social media as channels

“In this volatile market, enterprises demand real-time responses, not just causal analysis,” Sarma explains.

Corporations have had access to data for as long as there has been data. Until now, “the analytics business has been traditional data warehousing and business intelligence-based reporting,” explains Naresh Nagarajan, senior vice president and head of the Big Data Initiative at HCL Technologies. “Actions and insights were based on historical evidence. Forecasting depended on structured data in the business domain.”

However, today, “the volume of data is exploding. And it is available in so many forms and in so many places,” points out Rahul Kanodia, CEO and vice chairman, Datamatics.

He says the big challenge is so much of the data is unstructured—tweets instead of numbers historically found in a database. IDC estimates the amount of Big Data stored electronically will reach 25 trillion gigabytes by 2020.

Nagarajan of HCL points out “the explosion of social Webs and their real-time data feeds have changed the game. Corporations need to look at Big Data analytics with a completely different lens.”

“Extracting meaningful insights has become a challenge,” continues Kanodia of Datamatics. “This has given birth to a need breed of solutions.”

Hence the new popularity of analytics. Stephen Morris, senior business architect, business architecture + transformation UK for Wipro, says companies recognize they have to leverage the data flow to build competitive strategies. But with Big Data becoming so enormous, many enterprises do not possess the requisite tools to make the best use of the knowledge buried inside. Analytics is “a fast-emerging solution to this challenge. But it’s not just about unraveling historical trends. It provides a compelling tool to predict,” he explains.

Analytic trends

Sarma of TCS says business analytics “enables fact-based, insight-driven decision making to help companies manage their strategic, operating and financial performance and create shareholder value.” Morris of Wipro defines this need breed of analytics as “the tool that shows the health of an organization and charts where it needs to go forward.” He says analytics helps companies “stay focused on the current task, look for future opportunities and deal with potential challenges in their current processes.”

Analytics also promotes new thought processes, he continues. “They create new brain waves so organizations can look at things differently,” explains the Wipro executive.

Here are 11 trends impacting analytics, Big Data and business intelligence.

1. There is a shift from B2B to B2C.

Nagarajan of HCL calls this “the age of consumer centricity.” He cites “tectonic shifts in the business landscape across most business, but especially financial services, healthcare, retail and utilities. For example, retail banking is transforming due to the mobility explosion. Why go to a bank branch when you can deposit a check using your phone? “Analytics enabled on a mobile phone in real time will determine which bank acquires the small attention span of the rapidly-growing Gen Y customer. This is on-the-fly, real time analytics for prescriptive business acquisition,” he says.

2. Analytics is becoming a competitive differentiator

Analytics and business intelligence have become “competitive differentiators,” says Kulshreshtha of Genpact, because today companies operate in an economy “where growth is harder to get.” For example, pharmaceutical companies with billion-dollar drugs are losing their patents as they expire. So they have to cut their sales and marketing expenses significantly while continuing to support growth. “Essentially they need to figure out how to market much more cleverly,” Kulshreshtha says.

At the same time, consumer behavior in the U.S. is changing. For example, the savings rate reached a high of 6.9 percent according to the Commerce Department’s Bureau of Economic Analysis. “The consumer has realized times are volatile and it’s better to save. Today companies have to understand the new dynamics, predict consumer behavior of the future and get ready to use those to drive growth,” says Kulshreshtha.

The Genpact executive says companies today can no longer run large numbers of test marketing campaigns “to get the right results. Today they have to make more conscious choices, which is why they need to have higher business intelligence when making decisions.”

3. Corporations want predictive and prescriptive modeling

In the past, companies used analytics as a decision-support system based on historical data, says Abhay Chitnis, CTO, L&T Infotech. Today they want “actionable analytics,” data that points out trends “that will tell them this can happen if you don’t do that.” For example, companies are using analytics for resource planning and calculating actions if there are disruptions or delays.

Predictive and prescriptive modeling helps corporations get answers to the right questions, according to Don Weinstein, senior vice president, product management for ADP, Inc. “Today the trend is to use analytics to improve HR practices,” he explains. Before analytics could tell the HR department how many open positions it had. But does that help the company win the war for the best talent? “Today we can ask, ‘How do we hire the right people and where do we find them?’” he says.

In the consumer segment, Kanodia of Datamatics says the new tools and automation service providers can help their outsourcing buyers “give birth to micro strategies that address different customer segment down to single consumers.” He says ferreting out and taking advantage of micro trends are crucial in today’s uber-competitive world.

4. Analytics makes processes more strategic to the business

Asking the right questions makes HR more strategic for business results, Weinstein of ADP adds. “Analytics makes HR more strategic. But the job is definitely tougher, because now corporate leaders are holding HR accountable for business results,” he notes. According to Kanodia, “Analytics ensures that companies identify and remove net asset value from the processes to optimize the business information flow.”

5. Analytics can combine disparate data streams to improve business results

Nagarajan says HCL is currently working on real world evidence solutions – analyzing data from insurance companies as well as clinical data from hospitals “to tailor consumer health plans for specific population sets.” Another example: pharmaceutical companies are combining data from clinical trials, insurance claims from healthcare payors and social intelligence “to predict drug effectiveness and pricing.” He adds, “We ignored disparate data before.”

6. Enterprises want data available at all times in real time

Chitnis of L&T Infotech says data has to be constantly available if it is to be able to impact business processes. He predicts users will be able to interface with this data on multiple devices. He calls this “data churning on the fly.” He says sectors like retail will value geospatial business intelligence, because they can see data based on maps.

7. Enterprises want consolidated data

Weinstein of ADP says data historically was siloed and self-contained, coming from one process. That, however, is no longer helpful. Instead, companies need their outsourcers to amalgamate the data from disparate sources to get a full view. For example, if a company wants to evaluate the effectiveness of its hiring processes or its human capital, it needs to combine personal performance data with business data. “The biggest change we see is architecting analysis around business performance rather than process performance,” he says.

8. The shortage of mathematicians and statisticians may become a problem for both service providers and buyers

The Genpact executive foresees a shortage of mathematicians who the service providers need “to make sense of this enormous amount of data.” Weinstein of ADP says enterprises will “need to rethink the skills they have on their teams.” As HR, for example, becomes more metric-driven, the HR department will need statisticians and data modelers “who can dissect trends in large pools of data.”

Sarma of TCS adds these statisticians and mathematicians also need to be subject matter experts and have “a thorough understanding of the industry and its opportunities and challenges.” He says service providers need to hire talent with basic statistics skills and then invest in building deep industry knowledge in specific industries.

9. Top talent will be happier campers with the analytics now available

This is a win for the corporation. “HR people didn’t get into HR to process transactions. Their mission: to build a high performance team; analytics now enables that goal,” the ADP executive explains.

10. Service providers will bring more people onshore to do the analytics work

Kulshreshtha of Genpact predicts offshore providers will do more work onshore in the analytics arena. “Genpact plans to have over 500 analytics resources working in the U.S. in the next couple of years,” he reports.

11. The growing importance of analytics presents a huge opportunity for outsourcers who understand it

Weinstein sums up the situation: “The growing importance of analytics is a huge positive for the outsourcing market. With so much more data available, clients need to devote even more time to understanding what’s happening in their businesses while offloading as much of the day-to-day processing as possible. Now the outsourcing value proposition of focusing on what matters is even more strategic. The BPO service providers also have more opportunity because clients want us to help them understand the data and develop the strategies they need to drive business results,” says the ADP executive.

Conversely, boutique and single-process providers may find the future “challenging,” says Weinstein. He says someone has to integrate the data if a buyer has selected a host of point solutions. “People outsource because they want the integration,” he says. The only way to get a true picture of the human capital at a company is to have a full talent acquisition suite, a time and labor suite, and workforce administration and benefits package all tied together.

Concludes Nagarajan of HCL, “Those service providers that can leverage Big Data analytics to focus on business pain points will move up the value chain faster.”

This article focuses on those unsung heroes and the impact they’ll have on the industry moving forward.

Changing Expectations

In a previous article, we talked about the coming demise of the long-term, single-provider contract. Today’s engagements are shorter, more specialized and far less relationship-based than we’ve seen in the past. Governance is less granular, focused more on results than day-to-day transactions.

In almost every way, expectations have changed.

“In the past, our clients wanted to know the number of incidents and problems that occurred and how many of these we resolved. That was the benchmark,” said Vijay Balasubramanian, vice president and global head of CPG and eCommerce for HCL Technologies. “Now our clients want to know how much value we added. Instead of just resolving incidents and problems, they rely on us to link the business processes to applications landscape and identify value.

In the olden days of ITO, the support person didn’t know the impact of the incident on a business process. Now, providers are starting to map business processes to applications and business structures, so front-line support personnel don’t just respond to issues but identify ways to solve these permanently. Instead of contracts built on service level agreements, companies are beginning to base these contracts on output.

Innovation has also moved from a value-add buried in the depths of a proposal, into a position of prominence.

“We used to spend six months explaining who we were and what we did. Now, customers care more about how providers do ITO; how they bring innovation and how quickly they can do it,” Balasubramanian said. “Innovation is now a critical component to any ITO engagement.” The innovation is in the HOW rather than in the “who” or “what.”

A Surge in Desktop Virtualization

Desktop virtualization is also on the rise, driven in part by increasing numbers of remote users and contract employees. Desktop virtualization gives these users secure, anytime, anywhere system access from any device they choose – from laptop to tablet to smartphone.

“Desktop virtualization offers a number of benefits to companies and their users,” said Harish Krishnan, general manager and head of the End User Computing Services Practice at Wipro Technologies. “Because the data resides in a central location, it is much more secure than data housed on individual devices. The updates and patches can be easily done as the virtual desktops are in the data center as compared to geographically dispersed physical desktops. This lowers the management costs”.

According to Harish, thin clients significantly reduce power consumption by as much as 80 percent. It also lowers refresh costs.

“A thin client is cheaper and the refresh cycles are longer,” he said. “In a traditional environment, a refresh lasts three or four years, whereas a virtual refresh lasts six or seven years. Provisioning is easier as well, because you’re not working with a physical desktop.”

Today, companies are recognizing that the real value of virtualization isn’t lowering cost. It’s more about the value virtual environments bring to the table. For similar price as a traditional environment, virtualization delivers increased security, availability, agility, flexibility and a better user experience.

However, like Cloud, virtualization isn’t an “all or nothing” proposition.

“It’s important to note that it’s not feasible to virtualize everything. Companies need to segment users and virtualize what makes the most sense,” Harish said. “While power users on legacy systems aren’t strong candidates for virtualization, general office workers and contract workers are. It all comes down to the business case and so it is important to have the right virtualization solution based on the categorization of users.”

Consolidating IT Support

This new virtual environment has prompted companies and outsourcing providers to re-engineer the way they deliver support. Historically the desktop and service desk were combined functions. But in the last 10 years, these functions have largely been broken out, operating as separate units.

“In the past, when someone called the help desk, 20 percent to 30 percent of the calls required someone to physically go to the device to correct the issue. Now, with the widespread adoption of high-performance desktop operating subsystems and remote monitoring capabilities, that’s no longer the case,” explained Chris Pattacini, director of benchmarking for ProBenchmark, Alsbridge’s benchmarking division.

According to Pattacini, more companies are identifying the service desk as the source for problem resolution and desktop/help desk support for more “install, move, add or change” functions.

“We’re seeing more organizations bringing these two functions back together and no longer treating them as separate functions,” he said. “As desktop virtualization adoption increases, this more centralized support structure will increase in popularity as well.”

Converging Technologies

Companies are also getting more innovative in how they promote their product and brand to the consumer market. For example, because of a promotion that involves music downloads, a large, U.S.-based soft drink manufacturer is now also the third largest music distributor in the United Kingdom.

“We’re seeing a huge convergence of media entertainment, consumer packaged goods and retail,” Balasubramanian said. “Instead of investing in television advertising, companies want to engage consumers through social media, music downloads, digital coupons and other digital media. They’re turning to outsourcing partners to take advantage of digitization.”

More Complex Skill Sets

The advent of cloud, the increase in virtualization and the transformation of IT in the digital age are all changing what a traditional IT department looks like, from the CIO on down.

“Fifteen years ago, a CIO’s job was making sure the system worked. Since that time, the CIO’s role has changed as IT is now more closely mapped to business strategy,” Pattacini said. “With that evolution continuing and new delivery models increasing in significance, the CIO of the future will become an aggregator of suppliers and products to enable a company’s information needs.”

That CIO must also staff his own organization with individuals with skill sets to manage the new IT landscape, even if the company is relying on outsourcing.

“We see companies seeking employees who have experience with analytics, new technologies and Lean (Six Sigma) services,” Balasubramanian said. “Younger people and freelancers are now moving into established IT organizations, propelling the need for better methods of knowledge transfer. In the past, a good part of a company’s IT knowledge was not documented; the majority of that knowledge resided in a few employees’ heads.”

More collaborative tools, wikis and employee blogs, along with more formalized knowledge portals are becoming commonplace in organizations of all sizes, in many cases hosted and facilitated with the help of outsourcing partners.

What the Future Holds

No question, the world of ITO is changing, and changing fast.

“In the future, companies will have the tools in their toolkit to deploy servers and applications very quickly, so we’ll see more business units doing things on their own – bypassing the standard procurement structure,” Pattacini said.

Standards, security and IT framework will become more tightly integrated, so companies can consume services in a more productive way.

“It’s a leveling of the earth in the IT space once again, “Pattacini said. “In the 1980s, PCs went on desks and there was an outcry of ‘how will we manage this decentralized IT environment.’ Over time, the desktop support function was established and staff trained. We will go through this same evolution with new age products and services that business leaders can buy directly, such as Cloud and IaaS.”

The winners, as always, are the ones who can most effectively adapt to the change.

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