If information technology outsourcing (ITO) were a movie, cloud, analytics and mobility would be the headliners. Although this trendsetting triad is having a dramatic impact on how services are consumed and how companies operate, a number of other significant trends are emerging in the information technology outsourcing space.
This article focuses on those unsung heroes and the impact they’ll have on the industry moving forward.
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 information technology outsourcing, 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 Krishnan, 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,” Krishnan 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 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.”
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 information technology outsourcing 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. What’s your take on information technology outsourcing? Let us know!
About the Author: Ben Trowbridge is an accomplished Outsourcing Advisor with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, BPO, IT Outsourcing, and Cybersecurity Managed Services. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides valuable insights and guidance to buyers and managed services executives. Contact him at [email protected].