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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
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).

Execution: There's a greater emphasis on business user as influencer and providers are now expected to have an insight into customer expectations. There is a growing need for collaboration between providers and business leaders, marketers and sales staff (at the client end) as they are increasingly having a say on the IT spend decisions. Successful vendors will need to improve business acumen, consultative services and sales strategies.

Automation and Innovation:
Cloud, mobile, social and information are innovative and disruptive technologies and are revolutionizing business and society, and reshaping industries. Service providers should invest more in this next age of computing to deliver the benefits of these technologies to clients.

Adoption of automation will increase productivity and force workers to change how they execute their roles and the skills they need to enhance. For processes that are repeatable or more commodity-like, on-demand, cloud-sourced models will flourish. Automation of IT service provider offerings will lead to greater efficiencies, and bring down the pricing further. Providers that move early into this game and innovate their processes quickly are likely to benefit the most. We expect service providers to "raise their game" in terms of repetitive, non-differentiated tasks for value-added components that leverage automation.

Caught in the vortex of these changes, service providers need to focus on striking a delicate balance between maintaining revenue growth consistency and operating profitably in an intensely competitive market.
Our experience in providing outsourcing services to our partners over the last 17 years has propelled us as one of the leaders in the remote execution space. The real differentiator of our success has been our flexibility, which extends all the way from a customized engagement model, with "attitude" being given adequate weight in our recruitment process, to a team built to the specifications of the client. We have embarked on the next stage of transformation to build solutions for specific industry verticals.

IT has evolved from being a business enabler to a core element of business strategy that is advancing the needs and expectations of buyers. At the same time, IT services players, including clients as well as service providers, are feeling the pinch of rapid changes that are both economic and technological in nature. Moreover, there is an increased pressure on improving operating margins and ensuring delivery quality and client satisfaction. Those who are likely to succeed in this game are the ones that can manage these changes by being flexible and adaptable to partners' needs.

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