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January - 2015 - issue > CXO View Point

From Response based operations to enhancing client's business values, the Outsourcing industry has come a long way

Kiran Kumar
SVP, Digital Solutions-ValueLabs
Monday, January 12, 2015
Kiran Kumar
Fundamental changes have swept through the IT outsourcing market. Technology is today the central piece of any business strategy. But an outsourcing partner should act as more than just a technology provider. Service providers now need to wear multiple hats: as business partners, domain experts and consultants, to craft and execute strategies that help clients stay ahead of their competition.

This is a far cry from the days when outsourcing was primarily seen as a response by companies to substitute for the lack of resources they had internally, or to reduce costs and time to market. Over the years, providers have graduated to handling more complex and varied tasks. Some characteristics of this metamorphosis are:

Changing delivery models
Instead of a labour-centric approach, providers are now entering agreements for delivering specific outcomes for clients. Rising infrastructure costs and wage inflation is forcing providers and clients to make optimal use of IT talent. Clients have become more demanding, and are insisting on greater transparency and predictability from their service providers, which will increasingly guarantee outcomes and value. SLAs or outcome-based pricing methodologies are a better barometer for measuring value of a delivery relationship.

Adoption of technology as a utility service and cloud services has further accentuated this trend.This is prodding clients to prefer contracts with shorter terms and less onerous termination clauses as this helps decrease the time, cost and risk of switching vendors.

Providers are not shying away from making investment and operational restructuring to take further advantage of the industrialization of IT service. This is encouraging organizations to transfer ownership of IT assets from within the enterprise to outside it, preferably to service providers who will become the de facto source of accessible IT (infrastructure, applications and processes).

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