jump to navigation

Time to stop outsourcing? August 30, 2012

Posted by Mark Hillary in Current Affairs, Outsourcing.
Tags: , , , , , , ,
add a comment

Popular technology blog Horses for Sources has launched a survey asking whether they should stop using the word ‘outsourcing’ in their coverage of the industry.

Most involved in technology outsourcing have moved on from the old days of labour arbitrage or augmentation. Service providers don’t just pitch themselves as the cheapest any longer, they position themselves as the experts in whatever they do.

Clients commissioning work from the service providers know that they are buying in expert services, usually services they could not perform in-house.

But the political rhetoric has barely changed. As the US presidential election approaches, outsourcing is still considered a dirty word for politicians and a way to score a few cheap votes by patriotically insisting that they would ban it forever.

But these same politicians probably calculate their budgets using Microsoft Excel and broadcast information using Cisco services. They fail to see that any large technology company is already working with global resource and any company starting today will consider hiring suppliers from all over the world.

It’s not that outsourcing is about shipping work off to cheap economies; it is just that the Internet has created a global marketplace. If the marketplace is global then that can create both problems and opportunities back at home, but how come the politicians rarely focus on the opportunity of small niche companies being able to reach a bigger market?

So do you agree with HfS? Is it time the industry stopped using the term outsourcing and if so, what would be better?

Horse

 

Photo by Moyan Brenn licensed under Creative Commons

In uncertain times, what companies want is certainty April 26, 2012

Posted by Mark Hillary in Current Affairs, Outsourcing.
Tags: , , , , , , , , , , , , ,
add a comment

According to the Office for National Statistics (ONS), the UK is now officially in recession as the economy has contracted for the past two quarters. It is interesting to observe that many leading economists don’t believe the ONS data is correct, but these are the official numbers so we have to deal with what they present to the country.

Back when the present economic slowdown really began in 2007/08, many technology analysts predicted that a slowdown – or full recession – would be a good thing for the industry. If companies wanted to reduce outgoings they would look increasingly to offshore outsourcing as a way to achieve this.

But it never happened, and looking back it was quite obvious really. Any IT outsourcing programme has a lot of expense up front. Transition cost, training cost, consulting cost, auditing cost… there is a lot to budget for meaning that you have to commission a large piece of work, make sure it runs to plan and only once you get to the future business state can you hope to start making savings.

This meant that offshore outsourcing declined during the initial slowdown. It recovered and the market is growing again, but take a look around Europe right now. The UK is now in recession, Spain is about to go back into recession, the Euro currency lurches from one crisis to the next with the continuing reality that not all countries using the Euro now will be doing so at the end of this year.

The Dutch Prime Minister just resigned because his people refuse to adopt an austerity plan and the French are veering towards a new socialist president for similar reasons.

The level of political and economic uncertainty is so great that it would be foolish for any service supplier to still be selling the ‘reduce cost’ model of business. Now if they can start selling outsourcing based on a ‘we can tell you your costs for the next 5 years’ type model then in this present climate I expect there will be a lot more takers.

The last economic slowdown showed how unattractive the simplistic model of slash and burn offshoring really is. If we are heading into deeper economic uncertainty, that approach should not make a comeback.

Recession

Photo by Anders Vindegg licensed under Creative Commons

Is outsourcing coming of age? December 19, 2011

Posted by Mark Hillary in Current Affairs, IT Services, Outsourcing.
Tags: , , , , , , , ,
add a comment

As we head into 2012, it’s worth taking a moment to consider just how much the entire outsourcing market has changed. This is the year that the cloud really shifted from being an entirely separate concept to being intrinsically linked to the process of outsourcing.

A senior manager who made budget decisions always led the traditional market in services. It might be the CIO or the business line head – like the HR head for example – but it would always be a senior figure with a well-planned objective for the future state of the company.

This led to the traditional outsource, where an entire business process would be analysed, passed to the third party, and delivered by a service company – whether on site or remotely.

But ever since the growth of tools such as salesforce.com the model has been changing. Salesforce turned everything around by being a system that could be used over the web, with no need for any additional software, and paid for by user by the month… simple, clear, and without the need for big plans, vendor comparisons, or training programmes.

Salesforce is used by sales teams who buy it themselves on their own budget. They don’t ask a CIO to buy the system and then have maintenance teams install it.

So are cloud products like this really outsourcing? I believe so. If sales teams are trusting a third party with their information and using those tools as a part of what they do then it is just the same as if the CIO had outsourced CRM to a partner.

But it is a much more disparate world in which individual business line staff are making decisions about the tools they use to get the job done, making the job of those trying to control all of this much harder than before.

Outsourcing is not dead, it has just embraced the cloud and it now changing into something new.

wanted

Who is the customer? February 24, 2011

Posted by Mark Hillary in IT Services, Outsourcing.
Tags: , , , , , , , , , ,
add a comment

Possibly the most important discussion I had at the Nasscom event in India recently was around the changing role of the CIO, and how this changes the whole relationship between the client and the service supplier.

The CIO is an evolving role. It is becoming more strategically significant and is focusing more purely on information use and flow – which means that there is less emphasis on the purchase of IT systems.

At the same time, services are getting easier to buy. Companies are offering complete solutions that can be delivered using a web browser so absolutely no infrastructure or software is required – beyond Internet access.

So business heads are getting far more involved in specifying what they need and even going to the market and purchasing it without any involvement from the IT department. In fact, if there is no IT infrastructure requirement then why would the IT department need to know what is being purchased or used by the business?

This has always been the case in BPO. The person buying a new HR system was the HR director – not the CIO. They might purchase a system in communication with the CIO, but ultimately the decision was that of the business line head.

Now the same is applicable for a wider variety of systems – even technical systems that would previously have needed agreement from the CIO.

Does it make the CIO redundant as a function? I don’t think so as there still needs to be a strategy around infrastructure and security, but this does signal a complete change in the way companies use IT. The business user not only has the budget, but the power to buy, install, and maintain their own systems without any IT department interference.