Last Update July 5th, 2017
Will 2017 bring new challenges for outsourcing companies? The latest business environs and outsourcing is more dynamic than ever and changing rapidly with the ever-increasing client demands. According to subject matter experts, 2017 will prove to bring substantial shifts in the wake of new trends on the cards.
Major areas of which outsourcing industry trends will have a significant impact:
- Service providers role
- Faster deals
- Worries and remedies for multi-sourcing
- We have watched companies exploit the best-used strategies in offshore outsourcing
- Accept their leverage to rebid or renegotiate their deals
- Cloud computing
- Enhancing all kinds of possibilities to bring uniformity
Trend 1 – More Services required
Markets and Markets predicted that before the end of 2015, the industry of cloud computing would reach a worth of $121 billion. Companies are anticipated to utilize cloud-based technology to produce superior services. The cost effectiveness and automated processes will lighten up the work thereby creating more scope for competition.
According to a CIO article, customers are expected to purchase services from expert digital helpers like the BPO, ITO and cloud service providers, moreover, product based managed services is the norm as more big product-driven vendors like Cisco are selling their services too. We can expect a significant growth in managed services capability.
Trend 2 –Security greater importance
Security has become the prime factor for all companies and their management and will play the pivotal role for the strategy of outsourcing in 2016. Indeed, the security risk is composed to rise as Internet of Things (IoT), and telematics becomes more widespread in commercial products and consumer, according to business and technology sourcing practice, Mayer Browns partner Paul Roy. “Increasing numbers of threat actors will use increasingly creative ways to exploit weaknesses, often with devastating effect. Regulators will exact increasingly large fines for poor security. Service providers have often been the weakest link in a company’s security and will need to find better ways to address that concern.”
“In 2016, we expect to see the rise of the Chief Security Officer and more enterprises opting for specialized security vendors with Security-as-a-Service capabilities that can protect data no matter where it resides, “says Pace Harmon’s managing director Rahul Singh. “The threat profile changes every day and with every added protection comes a new vulnerability, not to mention it is becoming harder and harder to tie products together to deliver a robust security solution.”
Trend 3 –Vendors need a makeover
Vendors need to be more adjusting to meet the demands of these companies; they have been habituated to twisting customers to their tunes by offering low prices. However, in order to penetrate the market more like in its core functions, they have to change their behaviour according to the respective clients.
Trend 4 –Offshore captives return
A senior director of outsourcing consultancy Alsbridge, Randy Vetter, foretells that companies will set up their shops and inspire the knowledge they have acquired in process maturity as an outcome of working with outsourced offshore groups.
“The goal of this approach will be to reduce costs by taking away the provider’s margin, as well as increase flexibility by removing contractual constraints. In general, companies are likely to get smarter about insourcing,” says Alsbridge director Mary Patry.
“Rather than insourcing as a knee-jerk reaction to a bad outsourcing relationship and repeating past mistakes, clients will benefit from lessons learned and be smarter about what and how they repatriate.”
Trend 5 – VMOs go mainstream
Multi-sourcing has increased the work in the vendor management.
Alsbridges managing director Mike Slavin says, “As clients look for ways to address the challenges of overseeing increasingly complex multi-vendor service delivery models, the [vendor management office] will establish itself as a way to provide a high-level, enterprise-wide view while at the same time managing day-to-day operational details and multiple touch points between different providers in the service delivery chain.”
Trend 6 – Automation – future of relationships
- ITO and BPO companies are now focused on moving it to machines
- Since finding opportunities to give work to lower-cost people seems impossible,
- Deals have to be recreated on the part of customers and providers as they introduce the robotic process automation RPA in IT service delivery.
- New contracts need to be created for this new approach.
“Clients will rethink their sourcing strategies and how to build their RPA capabilities, and providers will continue to build automation into their solutions,” says Craig Nelson, managing director with Alsbridge. “Both parties will have to redefine roles and skills requirements for individual jobs, as well as maintain the touch points between automation functions and tasks performed by humans. This will present a significant challenge for outsourcing relationships as agreements will need to be flexible to accommodate these highly dynamic environments.”
Trend 7 – Multi-speed IT
This year outsourcing clients will identify the necessity to take different approaches to cope with the change the business’ and ‘running the business’ factors of IT.
According to COI, Eleanor Winn, managing director at Alsbridge tells “Clients will use the bi-modal approach to implementing commercial and contractual mechanisms with vendors to clearly delineate the roles of the respective groups and to optimize the contributions of each to the business.”
Trend 8 – Faster sourcing
Technology is advancing at a slower pace that means outsourcing decisions have to be quicker. Peterson of Mayor Brown foretells “Companies who decide on a digital strategy will execute quickly in 2016 to avoid seeing a technology shift or a competitor jumping ahead, we see increasing numbers of clients deploying substantial negotiating teams working on an agile basis to close smart deals fast.”
Trend 9 – Risk Management Put to the Test
Another important trend is to watch out for natural disasters, 2015 saw the great South Indian floods, which are among the risk factors that play big roles in driving businesses like outsourcing. The client might have to visit the site throughout the year to check work quality and seek technology to detect disasters, find early disaster recovery methods and plan business continuity. Companies might require pulling the plug to check if the provider can re-route work faster to other service centers without any notice.