I have often written on this blog about the nature of outsourcing and how it is changing and evolving – especially in Europe. For several years now I have been exploring how modern delivery methods for software and IT services have been changing – especially the way that enterprise software has followed consumer behavior towards cloud-based services or systems available using a method similar to the App Store.
This isn’t a controversial view, unless you are still defending the traditional method of IT outsourcing, but it is always worth backing up an opinion with research. Scan the pages of the Deloitte 2018 Global Outsourcing Survey and you will see that outsourcing is not only changing because of delivery methods, but also because it is more often being used to drive transformational change.
The business case for IT outsourcing today often depends on how disruptive a project can be. How can we replace the traditional way of delivering a service and completely disrupt the market?
The Deloitte research involves feedback from over 500 executives and 86% of them work in companies with revenue above $1bn a year, so this strategic use of outsourcing is becoming mainstream in large organizations. It is becoming clear that outsourcing is now seen as a highly strategic strategy for a number of reasons:
- Skills; It allows access to expertise in emerging technologies such as cloud, RPA, and data analytics, without the client needing to redefine their own skills.
- Innovation; Service providers are taking on a new role that is more explicitly about seeing the future – they are expected to not just deliver IT projects, but to offer ideas on how the client can operate in future.
- Security; traditional structures never placed data security at the heart of an organization, but modern service providers can introduce these practices.
The use of outsourcing is accelerating. In some industries it is dramatically increasing, such as 39% of Finance managers now working with partners for technology services compared to an expectation that 89% of them will soon be seeking a partner.
One of the most interesting findings from the Deloitte research is that the changing nature of outsourcing is not just about finding a new partner. Most of the time companies are using outsourcing to find a new solution – an entirely new way of working. Often this does also require a new partner, but it doesn’t need to, especially if IT companies, and others offering outsourced services, are proactive and start offering new ideas and solutions to their clients.
At the end of the day the changing nature of the outsourcing relationship is really being driven by innovation. Companies today are finding that the competition they face next year may not even exist today. It is possible for entrepreneurs to have an idea and then to create a global service thanks to the scale offered by cloud and app infrastructure.
Services such as Transferwise, Spotify, or Uber would not be able to function without this kind of IT infrastructure – and the ability to scale up so rapidly is dramatically changing many industries forever. I think it will take a while for some executives to stop thinking about outsourcing as a cost reduction strategy – this is still how the business press largely talks about it. However, as the cloud and RPA become more common and more important across all industries, it should become clear to most management teams that their approach to outsourcing is now strategically important for the future of their business. Transformation is getting disruptive.