Latest News  

IT outsourcing year 2015: major changes ahead

2015 was the year that IT outsourcing companies welcomed standardization, outcome-based contracts grew, while RFPs dimmed its pace.

2015-12-29 09:54:55

Customers embrace standardization

Companies did, in fact, become less interested in customer solutions and the intensive infrastructure required to support them, writes CIO magazine.. "They largely see standardization as a way to drive productivity, efficiency and maintainability of solutions," says Marc Tanowitz, managing director of outsourcing consultancy Pace Harmon.

"Service providers have clearly moved away from asset based deals, which is forcing buyers to increasingly invest in optimizing their IT infrastructure to meet the needs of their stakeholders. What's more, cloud providers began to offer more protections and options in their standard agreements, explains Rebecca Eisner, partner in the Chicago office of law firm Mayer Brown. "Companies embraced standard offerings in 2015 in large measure because providers began to embrace the needs of big company customers. This is particularly apparent for core functions for which cloud terms have historically been ill-suited."

Renegotiation reigns

Companies didn't just renegotiate at the end of their outsourcing deals, they started re-examining them mid-term, says Dan Masur, partner in Mayer Brown's Washington, D.C. office. "The renegotiations have been driven in part by re-solutioning to bring in new technologies, retrofitting to add digital technologies, restructuring to adopt outcome or output based pricing, reconciling the contract to changing realities, and re-sourcing components of the services to specialized providers."

This behavior, however, was more stop-gap than strategy, says Bill Huber, managing director with outsourcing consultancy Alsbridge. "The market has shifted dramatically, and re-competes have demonstrated the potential to unlock significantly greater value at this juncture than can usually be achieved by a straight renegotiation, whether or not the renegotiation includes re-scoping."

The deal-per-customer ratio continued to climb. "Clients are becoming increasing comfortable with best of breed suppliers and multi-provider environments," says Tanowitz of Pace Harmon. "Driven by popularity of the cloud, standardization allows clients to ‘plug in' or ‘unplug' providers easily, and many companies have moved away from deals with a heavy asset investment by the provider."

However, points out Information Services Group (ISG) partner Steven Hall, "many enterprises are still challenged with governing in a services-based environment and have yet to modernize their governance organizations. We continued to see rapid adoption of SaaS solutions;

workloads/applications moving to public cloud environments; and the implementation of bi-modal IT models, which all require advanced governance capabilities seen in product lifecycle management."

The cloud comes down to earth

Finally. "In 2015, cloud computing reached the end of the beginning," said Paul Roy, partner in the business and technology sourcing practice of Mayer Brown. "Cloud computing has become and is now a routine part of outsourcing conversations and solutions." Public, private and hybrid solutions were all on the table. "At this point, enterprises' forward looking investments almost always include cloud infrastructure for the apps they are supporting," says Pace Harmon's Tanowitz.

The sourcing decision becomes data-driven

"2015 saw the continued rise of Technology Business Management and TBM software providers," says ISG's Hall. "IT organizations are starving for actionable intelligence, based on their data, to help them make sound investment decisions." Tanowitz argues that sourcing has always been data driven: "data and analytics are essential to ensure sourcing decisions are grounded in a solid business case and also to ensure that the procurement process remains objective and audit-proof. We expect this to continue to be the case, even for emerging technologies and new and innovative services."

Outcomes become the name of the game

If only. "Outcome-based sourcing continues to face headwinds," explains Huber of Alsbridge. "Progress is being made, but the fact is that outcomes are difficult to define in a way that fits traditional contract structures, and they take time to get right. This is going to take more work by smart, creative deal-shapers before outcome-based sourcing can truly replace traditional input-based models as the predominant sourcing model." So far, the best we can offer is that some deals have shifted from input-based tooutput-based, says Brad Peterson, partner in Mayer Brown's Chicago office. "Pricing on outcomes like cash collections looks like a true answer but—like most true answers—takes great diligence and skill to achieve and remains relatively rare," he explains. "However, the move to output-based pricing is an important move away from the typical pricing based on inputs and a step closer to a true business outcomes measure."

The business takes over
Business leaders did play a bigger role in procuring IT services—particularly cloud services—than in the past. However, "IT remains vital for the integration of service provider solutions and for effective security," says Eisner. "The business has certainly taken over the digital agenda in many organizations and SaaS solutions, such as HR technology, are being made outside of IT," says ISG's Hall. "But, many CIOs have stepped up this year to own the digital agenda for their enterprise."
And odds are IT may become even more integral to future sourcing decisions. "Cybersecurity and interoperability trump unfettered business-centrism as the Internet of Things adds another layer of complexity and vulnerability," says Huber Alsbridge.

The RFP fades
"The RFP continues to be an essential piece of the competitive procurement process, particularly for complex products and services," says Tanowitz of Pace Harmon. "However, we are seeing more collaborative approaches to RFPs, such as co-developing statements of work and creating more solution-oriented approaches to RFPs that lend more flexibility to the process and allow suppliers to offer innovative solutions."

While the RFP remained entrenched, it did not go unquestioned. "The RFP has not gone away, but the old templates have grown stale, and sourcing processes, including RFPs, need to become more adaptive," says Alsbridge's Huber. The tried-and-true approach never worked well for emerging technologies, says Peterson of Mayer Brown. "There, RFIs, RFSs and Proof of Concept projects work better. However, the RFP has remained a trusty tool for traditional outsourcing deals where it remains important to communicate requirements and obtain comparable information from potential service providers."

Dawn of the cloud robots

"We've certainly seen an uptick in conversations about robotics process automation (RPA), but the reality is that cloud robots are still little more than Excel macros at this point," says Tanowitz. "Providers discuss cloud robots frequently and the benefits can be meaningful in terms of productivity gains, but we haven't seen clients take advantage of the technology in a meaningful way." Automation is advancing, says Brian Bodor, partner in the global sourcing practice of Pillsbury, "but we have yet to see the ‘rise of the machines.' We expect to continue to watch this trend in 2016 and beyond."
Where robotics and automation have taken hold is not cloud computing, but business process outsourcing, says Roy of Mayer Brown.

Supplier risk takes center stage

Outsourcing customers did not get serious about supplier risk overall, but they did get hyper-focused on cybersecurity. As a result, clients paid more attention to service location in signing deals, says Eisner of Mayer Brown. "We generally see supplier risk conversations ebb and flow with current events," explains Pace Harmon's Tanowitz. "Rather than preparing for supplier risk based on geographic instability or events, we're seeing enterprises preparing more holistically for disaster response and recovery, including assessing cybersecurity risks and the protection of customer data that may be in the hands of their supplier.


0 COMMENTS ^ Go back to Top
WRITE A COMMENT ^ Go back to Top
 
Your email address will not be published.
Nickname
Email
Comment
Validation Code
   
 
 
NEWS
Cushman & Wakefield Echinox: StreamWIDE joins the new IT hub created in the Timpuri Noi Square project

StreamWIDE, a company specialized in the software and telecommunications industry, realocates its office in Bucharest in the Timpuri Noi Square project, joining the new IT hub created in the business park devel

 Read Full article »
CBRE: Office deliveries expected to bring new stock of 635.00 sqm, Bucharest to reach 3.9 mln sqm modern office spaces

During 2020–2021 to approx. 635,000 sqm of modern office space are expected to be delivered on market, increasing the Bucharest modern stock at approx. 3.9 million sq m, a step closer to a new a threshold and

 Read Full article »
Uber opens at Bucharest the largest support center to drivers and business partners in CEE

Uber company launched this week in Bucharest the largest center in Central and Eastern Europe that offers assistance to drivers and business partners in Romania, a center where they can contact directly Uber re

 Read Full article »
Samsung and Orange Romania activated the 5G VR Live streaming at Untold Music Festival in Romania

Samsung Electronics and Orange Romania have successfully deployed a 5G New Radio (NR) network to demonstrate a series of 5G use cases at Untold Festival 2019, the largest annual dance music festival in Romania,

 Read Full article »
MVP Lab in Sibiu named as one of Europe's best in the "Ones to Watch" list at European Business Awards

Ropardo MVP Lab has been named as ‘One to Watch' in Europe in a list of business excellence published by the European Business Awards, one of world's largest and longest running business competitions.

 Read Full article »
Endava marks one year since IPO

Endava, one of the most important software companies, present on the local market with 7 delivery centers, reaches an almost double capitalization, 2.07 billion USD, on July 26, 2019, one year after listing. Th

 Read Full article »
Infosys opens cyber defence centre in Bucharest

Infosys, a global leader in next-generation digital services and consulting, announced the launch of its Cyber Defence Centre in Bucharest, Romania. The Defence Centre is an expansion of services delivered thro

 Read Full article »
QuEST Global completes integration of IT Six Global Services

QuEST Global, a global product engineering and lifecycle services company, has successfully completed the integration of IT Six Global Services SRL. QuEST Global acquired IT Six, a software engineering services

 Read Full article »
RE MAX Romania opens three more offices

RE/MAX Romania has expanded its network, adding three new offices – RE/MAX Partners in Cluj, RE/MAX Quality in Sibiu and RE/MAX Prestige in Targu Mures.

 Read Full article »
Microsoft and OpenAI form exclusive computing partnership to build new Azure AI supercomputing technologies

Microsoft Corp. and OpenAI have partnered to further extend Microsoft Azure's capabilities in large-scale AI systems, according to a release of Microsoft.

 Read Full article »
 
 
 
MOST READ ARTICLES
» Six reasons why you need a single clou...
» Coresi Business Park obtains the first...
» BSA study shows that IT security threa...
» Two new managers appointed in the Boar...
» Ymens launches new ERP for Romanian mi...
» BP expands Wipro contract, possibly by...
» IT outsourcing year 2015: major change...
» Stefanini: Using Agile in Brazil, or h...
» Exclusive OT: British company Xoomwork...
» ROMANIAN OUTSOURCING AWARDS FOR EXCELL...
 
EDITOR CHOICE
Workplace of the Future conference to take place on November 20th at Bucharest

The Diplomat-Bucharest together with Outsourcing Today organize the 3rd Edition of WORKPLACE OF THE FUTURE, on 20th of November 2019, in Bucharest, at Capital Plaza Hotel.

 Read Full article »
Strategic Talent Acquisition at People Empowering Business Forum on October 30 in Bucharest

Latest trends like demographic upheaval, globalization, digital technology, and changing social values and worker expectations, are disrupting business models and radically changing the workplace. These are req

 Read Full article »
Informal IT School and UiPath launch an educational program for RPA development to start in October

Informal IT School announced a partnership with UiPath to launch an RPA development educational program of five months, 100 hours of courses, five days a week. The program will run in Cluj-Napoca.

 Read Full article »
Impact Hub Bucharest joins 3house to manage three coworking spaces in the city

Impact Hub Bucharest, a coworking spaces manager and developer of accelerator programs and events merged with 3house, a new concept of workplace launched in 2018. By this, Impact Hub reaches 3 locations and 6.7

 Read Full article »
JLL: Total office space in Bucharest to reach 3 million sqm

The second quarter of 2019 reconfirmed the increased interest for the office market in Romania. Over 115,000 square meters of office space were leased over this period at the national level, a value similar wit

 Read Full article »
Latest News  
 
about us | newsletter | contact | members area | GDPR policy
Copyright © 2015 by Diplomat Media Events Design by Diplomat Media Events