Recent press reports have provided emphasis to the reckoning that some IT Services providers have become “too reliant on IT Outsourcing.” I find this remarkable on a number of fronts.
Foremost, most legitimate industry analysts have been prolific in expressing the magnitude of the gravitational shift away from “economies of scale” propositions that defined the IT Outsourcing promise of yesterday. That era began to erode with the rise of the wage-based sourcing strategies that dominated the industry for the past several years. Given the opportunity to tap into lower cost offshore expertise was a convenient and effective means to avoid outsourcing IT operations, and began to highlight the power of process-driven efficiencies.
Offshoring taught the industry that scale-based propositions didn’t necessarily yield more value than those pivoting around “economies of skill.”
To wit, leading practitioners in the IT Services industry have been transforming their offerings to be decidedly more blended in terms of industrial-grade components that serve as the foundation for business-relevant “as a service” offerings driven by high-order skills in particular business processes. There are very few “desktop support outsourcing” contracts awarded, in favor of “virtual end user computing services” that equip the mobile knowledge worker of the enterprise. Today’s leaders (and we count CSC among them) have been busy re-evaluating their service portfolio, making investments in emerging services, and bringing innovations in business models along with the latest technological solutions.
It’s not IT Outsourcing any longer. It’s Infrastructure-as-a-Service. That’s not a matter of nomenclature; it’s a matter of service pragmatics. Corporations and governments are not just buying different types of services; they want to move from being buyers of hardware and software and associated heavy capital expenditure to an “as a service economy” with operational expenditures.
We believe that within five years about 30 percent of the IT services business will be “as a service” rather than traditional outsourcing. Why do we believe this? We listen to the plans of our Clients.
The advice I offer to prospective buyers of IT Services is to quiz the candidate providers around their perspective of the industry, and their strategy to succeed. If the answer sounds like, “grow our base of traditional ITO business,” it’s time to move the conversation to another party. The “as a Service” train left the station and ITO’s legacy is best expressed through the large number of informed and experienced buyers who can make the distinction between yesterday and tomorrow.