The New Outsourcing Buzzwords

Just five years ago, the outsourcing industry had its sights set on one thing: cost savings. And the industry buzzwords reflected this focus. Enterprises were first and foremost concerned with the benefits they could gain from labor arbitrage and from reducing their total cost of ownership.

Back then, organizations primarily sought to optimize their information technology (IT) and replace capital expenditures with short-term operational expenditures. They engaged most frequently with Information Technology Outsourcing (ITO) providers that could help them save money and modernize their legacy applications.

Today, enterprises are shifting away from thinking about outsourcing as a purely financial decision and increasingly consider it to be part of a business strategy critical to their success. Their new goals are to find and maximize value in a broader sense – not only running the business more efficiently, but finding new ways of connecting with customers and growing the business.

A company may, for example, move its entire organization to a third-generation cloud-based platform to take advantage of new capabilities and products based on sensor data, analytics and data services. These kinds of multi-year strategies are highly reliant on transitioning to cloud-based services and consuming micro-services.

Of course, as core objectives change, so do the buzzwords. The current vocabulary has dropped its preoccupation with reducing costs and has taken up the cause for agility and speeding time to market. Instead of simply outsourcing to save money, organizations need their IT outsourcing service providers to help them maintain supply and demand, build applications and move workloads into the cloud. In fact, studies show that sixty percent of all companies will use software-as-a-service within the next 12 months, and eighty-four percent of all new software hitting the market will be cloud-based.

Today, the buzzwords for businesses looking to outsource show their shift in priorities. They want:

  • Agility
  • Faster time to market
  • Faster response to market conditions
  • New products
  • New market opportunities
  • New applications
  • Customer-centricity
  • Hybrid IT

What’s perhaps even more interesting than the change in buzzwords is the fact that the business, not the IT organization, is behind it all. The Digital Business Units and Chief Digital Officers are defining the path forward, and many CIOs are looking to redefine themselves in this context. As IT shifts from an “operate” paradigm to an “integrate” paradigm, forward-thinking organizations are moving to platforms that can integrate services and micro-services from a broad spectrum of providers to create new offerings.

I will be discussing these changing business objectives in a facilitated panel, “XaaS is Shuffling the Sourcing Deck,” at SIC 2015, September 28-29 in Dallas. Visit the SIC website to register. Or contact me directly to discuss further.

About the author

Steve helps enterprises think through the opportunities and complexities brought about today’s dizzying array of emerging technologies. He is a seasoned professional, fluent in how to make transformational change with cloud, automation, mobile, or DevOps and discerning in where and when they add value. He has helped implement many global service delivery models and advised large multi-national corporations on their IT strategies. Steve co-authored Managing Global Development Risk, A Guide to Managing Global Software Development. As a Partner and member of ISG’s Executive Board, Steve leads ISG’s Digital Strategy and all ISG Service Lines for the Americas.  Steve also leads ISG’s Alliance group and is ISG’s Executive Sponsor to the TBM Council.