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Emerging Trends in IT Outsourcing

The global IT Services industry holds significant opportunities for industry players due to continued increase in IT spending. Disruption is evident in software and services delivery, business models, vast amount of money is being poured into startups of all stripes, the cloud, big data, entrepreneurialism, and constant innovation. Against that backdrop, companies can no longer rely on one-note value strategies. At SmartIMS, we always believed that there is really no one-size fits all methodology or model that works for all business and so have always been very keen to understand the client’s specific context, culture and constraints to tailor our services for the best outcome.

Some emerging trends we see in this industry are:

Industry Matures

Tactical non-critical Operations as Cost Center to Innovative Technology Solutions as Business Accelerator

Increasingly, technology firms are re-examining the structure of their businesses and taking bold steps to squeeze out better financial performance. In the past, outsourcing focused on tactical, nonessential activities such as payroll processing or manned security stations. But the focus is shifting. Businesses are quickly realising that it is crucial to transition their application development streams from a cost center to a business accelerator to keep pace in the digital age. This transition is not easy as the operating environment and rules of engagement calls for a fundamental shift.

Pushed by companies to demonstrate not just business value but, also business advantage and edge, service providers have to build robust, highly tailored offerings that deliver economic, strategic, operational, and all round business benefits. Further, they have to differentiate their offerings by demonstrating clear industry or domain expertise.

Not Just about Cost 

Although, the pressure to cut costs shows no signs of abating — it will increasingly share importance with more strategic drivers in the decision to outsource technology services. Increasing competition, pressure on billing rates of traditional services and increasing commoditization of lower-end services are among the key reasons forcing the software services industry to make a fast move up in the software value chain. The companies now need to be positioned to offer higher value-added services like consulting, product development, R&D as well as new digital technologies like social media, mobility, analytics, and cloud computing (SMAC) to survive and compete in this market. 

Shifting from Delivery to Engagement

IT organizations concerned exclusively with service delivery will almost certainly be disengaged from the business and its problems. This may lead the rest of the enterprise to view such service providers as a temporary arrangement to help deliver some tactical low end deliverables. This poses a serious threat as such service providers fail to move up the value chain making them rapidly insignificant in this market.

In contrast, the business-engaged IT services organisation takes control of its destiny. Engaged and integrated with the business, it becomes an active and influential participant in solving business problems, thus transforming themselves from being just a delivery partner to a strategic business partner.

Complex Multi-Sourcing Engagements

The marketplace for outsourcing is far more varied than it was a few years ago, with competitors of all sizes operating primarily from India, China, Russia, Middle-east and the Philippines and offering their wares to customers around the world. Enterprises will look to outsource different parts of their operations and business to different proven experts to extract the maximum return on their investment. This increases the need for multi-service integration capabilities, called service integration and management (SIAM) or multi-sourcing services integration (MSI)

 “Where” is critical. 

Companies will be forced to carefully choose offshored sites to optimize a mix of factors: access to a qualified work force, access to technology clusters or academic institutions, access to desirable markets and the presence of a welcoming business environment. This means service providers should be ready to offer a customized multi-location service model to best suit the needs of the businesses so they can offer the “Best of Both Shores” (near-shore, offshore and onsite)

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