Business-Oriented Trends in IT Outsourcing

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Identifies business-oriented trends in Information Technology outsourcing

Text of Business-Oriented Trends in IT Outsourcing

  • Business-Oriented Trends in IT Outsourcing

    Alan McSweeney

  • January 30, 2012 2

    Objectives

    To identify business-oriented trends in Information Technology outsourcing

  • January 30, 2012 3

    Topics

    Outsourcing Trends

    Business-Oriented General IT Trends

    Transition and Transformation Within Outsourcing

    Outsourcing and Innovation

    A (Financial) Tale of Three Outsourcing Vendors

  • January 30, 2012 4

    ITO Trends

  • January 30, 2012 5

    State of Outsourcing in 2011

    Survey conducted by the London School of Economics Outsourcing Unit

    1,209 Buyers, Providers and Advisors of Outsourcing Services

    Large study across spectrum of outsourcing industry

    Provides insight into market trends and therefore should be part of any organisations strategy

  • January 30, 2012 6

    State of Outsourcing in 2011

    Key points

    Outsourcing increasing across all organisation sizes and organisations that do not currently outsource

    Cost an important factor

    After cost, track record, culture, global scale and knowledge are important

    Advisors playing an increasingly important role

    Outsourcing providers not aware of how they are perceived

    Focus is on business benefits rather than technology

  • January 30, 2012 7

    State of Outsourcing in 2011 Some Results

    Nearly three quarters or organisations plan to increase outsourcing activities

    59% of organisations with a shared services function and planning to increase outsourcing significantly Shared services function is an organisational infrastructural stepping stone to outsourcing

    Key reasons for outsourcing are Cost reduction - 60-76% view as very important, depending on organisation size More effective operations - 50-64% view as very important, depending on organisation size

    46% have found outsourcing very effective in reducing costs 35% have found outsourcing ineffective in innovation 31% have found outsourcing ineffective in proving access to new technology 31% have found outsourcing ineffective in proving access to business process knowledge and experience

    In-house delivery of IT and Business Processes still dominates with outsourcing limited to Help Desk and application development and support

    Factors rated as very important such as not being convinced of service providers capabilities (39%), not being convinced of long-term business benefits (30%), insufficient short-term cost savings (37%) and fear of disruption limiting (31%) decisions to outsource

    29% of outsourcing suppliers view buyers not being convinced of their capabilities as being very important - gulf between buyer and provider

    IT infrastructure and application development and maintenance outsourcing are seen as the core outsourcing areas by buyers 68% already outsource infrastructure and will increase or plan to outsource 62% already outsource application development and maintenance outsourcing and will increase or plan to outsource

    63% of medium-sized companies and 44% of large companies say outsourcing has been very effective in reducing costs

    Buyers rate financial stability, track record and change management/governance process delivery, scale, industry specific knowledge and culture as the most critically important skills of outsourcing suppliers

    The role of advisor in working with buyers on outsourcing is increasing

  • January 30, 2012 8

    Study Respondents Profile

  • January 30, 2012 9

    Buyers Organisation Size by Revenue

  • January 30, 2012 10

    Buyers Industries

  • January 30, 2012 11

    Outsourcing And Shared Services Delivery Dominate Global Service Models Over Next 3 Years

    Emerging from the recession, will your company increase / reduce its reliance on the following operating models for general and administrative functions, over the next three years?

  • January 30, 2012 12

    Most Organisations With Shared Services Are Increasing Outsourcing

    Emerging from the recession, will your company increase / reduce its reliance on the following operating models for your general and administrative functions, over the next 3 years?

  • January 30, 2012 13

    Business Challenges Driving Outsourcing In 2011

    How Important Are The Following Business Drivers Behind Your Company's IT Outsourcing And BPO Decision-Making This Year? Answer = Very Important

  • January 30, 2012 14

    Europeans Want To Drive Out Cost And Globalise Without Changing Their Processes

    How Important Are The Following Business Drivers Behind Your Company's IT Outsourcing And BPO Decision-Making This Year? Answer = Very Important

  • January 30, 2012 15

    Buyers Achieving Modest Business Results Beyond Cost-Reduction With Their Outsourcing Initiatives

    How Effective Have Your Current Outsourcing Initiatives Been At Achieving The Following Business Benefits To-Date?

  • January 30, 2012 16

    What Is Your Primary Sourcing Model For Managing The Following IT and Business Processes?

    Untapped sourcing potential

    In-house delivery of IT and Business Processes still dominant in 2011

  • January 30, 2012 17

    Concerns Holding Back Outsourcing In 2011

    How Important Are The Following Factors Preventing Your Organisation From IT Outsourcing Or Business Processes Over The Next 12 Months?

  • January 30, 2012 18

    Providers Oblivious To Buyers Perception Of Them

    How Important Are The Following Factors In Preventing Your Clients From Outsourcing IT Or Business Processes Over The Next 12 Months? (Outsourcing Providers)

  • January 30, 2012 19

    Demand For Core General And Administrative Outsourcing Reaches Unprecedented Levels

  • January 30, 2012 20

    First-Time Enterprise Buyers Look To Jump Into BPO

    % Buy-side organizations looking to outsource for the first time over the next 12 months

  • January 30, 2012 21

    Effectiveness Of Current Outsourcing Engagements: Mid-Market Organisations Benefitting The Most

    How Effective Have Your Current Outsourcing Initiatives Been For Achieving The Following Business Benefits To-Date? Answer = Very Effective

  • January 30, 2012 22

    The Enterprise Market Gears Up For An Aggressive Spike In Scope-Expansion Across Maturing Functions

    % Buy-Side Organisations Already Outsourcing And Intending To Increase Scope Over The Next 12 Months

  • January 30, 2012 23

    After Financial Considerations, Buyers Care (Or Say They Care) About The Governance, Industry Acumen And Cultural Attributes Of Providers

    How Important Are The Following Attributes To Your Clients Today, When Considering A Service Provider Relationship For IT/BPO Services?

  • January 30, 2012 24

    Providers Underestimate Importance Buyers Place On Change Management, Governance And Culture

  • January 30, 2012 25

    Advisors Are Buoyant About It When Looking At Future Outsourcing Plans

    Do You Expect Your Clients To Increase Or Reduce Their Activity Across The Following Areas, Over The Next 18 Months? Outsourcing Advisers And Suppliers

  • January 30, 2012 26

    Management Consultants Increasingly Influencing Outsourcing

    Extent By Which Providers Have Been Seeing The Following Advisors Influence Their Clients' Outsourcing Decision-Making Over The Last Six Months

  • January 30, 2012 27

    ITO Concerns

    Transition takes too long

    Not integrated

    Business disruptions

    Increased business risk

    Lower service quality

    Treatment of acquired employees

    Does not deliver value

    High cost of operation

    Confusion over what is being sold

  • January 30, 2012 28

    Analysis of Some Information Technology Trends

    AICPA Survey of members from 2001 to 2011 on initiatives in IT that are of concern to their 370,000 members

    http://www.aicpa.org/INTERESTAREAS/INFORMATIONTECHNOLOGY/RESOURCES/TOPTECHNOLOGYINITIATIVES/Pages/2011TopTechInitiatives.aspx

    Gartner well known analyst company

    Two very different views of information technology trends

    Business-oriented

    Technology-oriented

    IT tends to be concerned with technology trends for themselves rather than their application to business

    IT outsourcing needs to concern itself with business needs rather than just pure IT

  • January 30, 2012 29

    Gartner Key IT Trends 2008 - 2011

    2011 2010 2009 2008

    1 Cloud Computing Cloud Computing Virtualisation Green IT

    2 Mobile Applications and Media Tablets

    Advanced Analytics Cloud Computing Unified Communications

    3 Social Communications and Collaboration

    Client Computing Servers - Beyond Blades Business Process Modelling

    4 Video IT for Green Web-Oriented Architectures

    Metadata Management

    5 Next Generation Analytics Reshaping the Data Centre Enterprise Mashups Virtualisation 2.0

    6 Social Analytics Social Computing Specialised Systems Mashup and Composite Applications

    7 Context-Aware Computing Security Activity Monitoring

    Social Software and Social

    Networking

    Web Platform and Web-

    Oriented Architectures

    8 Storage Class Memory Flash Memory Unified Communications Computing Fabric

    9 Ubiquitous Computing Virtualisation for Availability

    Business Intelligence Real World Web

    10 Fabric-Based Infrastructure and Computers

    Mobile Applications Green IT Social Software

    How relevant are these trends to the business and to end-user organisations?

    Where have the old trends gone to