According to IDC, The industry's dramatic and disruptive shift to its 3rd Platform for innovation and growth will accelerate in 2015: Spending on these technologies and solutions — growing at 13% — will account for one-third of all industry revenue and 100% of growth. The 2nd Platform world will tip into recession by mid-2015. 1
Driven by some of the fastest changes that the IT market has seen for years, the traditional approach to outsourcing is becoming more difficult to apply as client and consumer needs are constantly changing. Whether that is the need for Mobile enabled applications, Cloud delivered platforms and services, or the need for delivering better business outcomes through use of the Data and Analytics or the effect on Brand reputation through instantaneous social feedback, the enterprise customer is becoming more demanding as technology moves to the third platform and organisations need to be more agile in the market place to survive.
If we look back 5-10 years, the IT Outsourcing (ITO) business was focused on running core IT functions for large organisations and government departments with long term contracts that have a typical length of 7-10 years. During the contract period, the outsourcer would deliver the core IT services and run the IT environment for the client and help drive down cost and improve the efficiency of the environment. However, this outsourcing approach was typically un-dynamic and often lead to the Outsourcing contract being based on an old way of delivering outdated IT and IT efficiencies in a budget that was determined at the start of the contract.
So, with the change in contract length to typically 3 years with possible 2 year extensions, the introduction of Cloud based Infrastructure, Services and applications, Global System Integrators (GSIs) need to be much more agile in their approach to their business. Being large organisations themselves, they provide a good risk profile for the customer. However, on the downside, being large organisations they are not always as agile as smaller regional integrators or specialist companies when it comes to adapting to market change.
So, how are the outsourcing businesses changing to adapt to the market change?
1.) Adopting a more agile approach to outsourcing and adopting Systems Integration and Management (SIAM) models in order to help deliver a consistent service level to their clients, no matter what services they are delivering.
By adopting the SIAM model, the Systems Integrator is able to deliver consistent service levels for the core outsourcing services to the client - whether they are delivered from an onshore, offshore or third party who has a specific industry or application knowledge for the specific area of outsourcing e.g. HCM, Retail etc. Additionally, by using this model, new services can be adopted and added into the service offering more quickly e.g. End User Computing or SaaS.
2.) Understanding the customers’ market and the specific market business needs. As an ITO it is not good enough to be able to deliver an outsourcing service alone, it is important to also understand the challenges and restrictions of the market you are entering. g. Defence Outsourcing is quite different than Retail Outsourcing. If they do not have the skills and Market and Business knowledge of that sector, it is very easy to see an outsourcing project go wrong and lose money due to unforeseen industry challenges.
3.) Organisations are adopting DevOps In order to deliver a more agile and faster approach to delivering applications and services, business are adopting the DevOps actions of: People, Process, Culture and Tools in order to deliver better Business Process Management outcomes. This is key to allow the Systems integrator/Outsourcer to adapt to the changing Cloud and Consumer driven society and deliver front, back and mid-office solutions more rapidly to their clients.
4.) Building Digital Practices. Outsourcers are building Digital Practices to help deliver the innovation that might otherwise be difficult to achieve under the traditional outsourcing model. These practices are designed to meet the needs of the third platform with Cloud, Mobility, Social and Big Data Analytics at the core of the services they deliver. As with any IT project today Mobility is a key part of the deliverable outcome for the client, as it brings complete business and end user inclusion, so the Digital practices have to have a Mobility strategy as part of core offering they take to market.
Source: IDC MaturityScape Digital Transformation Stage Overview, March 2015.
5.) Focusing on the business transformation need - not just the ITO needs. Traditionally the Systems Integrator has been focussed on the IT side of outsourcing with separate businesses for Consultancy & BPO however as the change to the third platform accelerates, the ITO is changing to incorporate many of the elements from the Business Consultancy and BPO business as part of a wider business transformation offering.
In today’s channel, outsourcing businesses are being forced to adapt to the constant market change. Is your organisation using any other methods to adapt to the market change and to prepare for the third platform? Please include them in the comments below.
1 IDC Predictions 2015: Accelerating Innovation - and Growth - on the 3rd Platform, doc #252700, December 2014.