5 IT Outsourcing Trends that Are Going Cold

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By Pratik H

A lot of IT companies are becoming more strategic, so are their IT outsourcing partners. Things like digital transformation, automation, and data revolution are shaking the IT industry and impacting the quality of work IT providers give.

Here are some of the IT trends that are going on cold now. If you are an outsourcing provider, this guide should help you rethink your decisions when you are dealing with the clients or customers who may need your services.

IT operational costs are going up by 2.5% every year. IT organizations are putting more resources into internal operations and capital investments than they are spending with their outsourcing providers. The million-dollar question is, is this going to a long term trend? No, but it could mean a new phase of recovery. That said, let's look at the five declining trends in IT outsourcing.

Being a Jack of All Trades

Initially, most IT service providers were happy to be everything for everyone. Today things have changed; rationalization and specialization are now shaping the IT outsourcing industry.

That is because IT outsourcing marketing is getting competitive day in day out. Large IT service companies are spending most of their time determining what they are not going to cover.

Since the digital market is expanding and becoming more complex, it is not going to be possible for one to be a master of everything. The good news is, IT vendors realize this very soon. Firms today are specializing more on their core market to provide better services to their clients.

In areas where the firm has a weakness, they will bring a more specialized partner who will handle that in an excellent old fashionable way.

Traditional IT metrics and SLAs

The biggest challenge facing the IT services industry in 2020 is transformation. Transformation is linked to how one quantifies IT services. If you look at how contracts are structured today, you will notice that they are shifting transaction models to performance and results models.

In other words, the old IT metrics and SLAs are fading away. What that means is, as a service provider, you have to repackage services so that the client sees the benefit of working with you.

When you go to workplace services, a lot of enterprises want experience-level agreements or SLAs. In the last couple of years, the number of contracts has gone up only because the clients or customers are looking at Net Promoter Scores or Customer Experience Index when they are evaluating their service partner.

Low-cost Service Desks and Call Centers

Most CIOs and IT leaders know that outsourcing the face of their business may not be the best thing to do for their company. Service desks and call centers are critical business activities. They generate sales.

Chances are, the person they hired may not represent the face of their business well. With that said, on-site and integrated solutions are what these leaders want. In other words, they need a complete workplace solution that works well with their delivery models.

In the coming years, the purpose of service desks will be defined again. According to Wright, founder of Pace Harmon, shift left solutions are focused on changing the service desk to self-help. But Most CIOs want only to shift essential technical IT challenging support services without interfering with the quality of their service, speed, and contact resolution.

That said, outsourcing companies will pay a little amount if you offer excellent customer experience and quicker resolutions like what a transformed service desk will deliver.

Traditional sourcing models

The old way of outsourcing has been under lots of criticism, and that traditional system is quickly fading away. For instance, digital services and the as-a-service model has brought more revenue in the past few years. Besides that, commercial models are catching up, and their pricing is geared towards meeting the client's outcome. The new pricing model is different from traditional outsourcing. What that means is, this is an excellent blow to companies who still have conventional sourcing models.

Promises of digital payback

A lot of IT service providers are reluctant to adapt to a specific payback period on digital initiatives. A lot of providers promote to deliver results in 24 months or less, but there are contracts saying something different about payments.

A lot of clients don't have the patience for such engagement models. One thing we need to understand is, companies want to save costs through outsourcing. They don't want to be tied to long term contracts and engagements that will eat up their cost through digital initiatives.

Instead, companies want service providers who can guarantee them digital ROI and contracts driven returns. The partners who provide the services and structure the deals this way will have more outsourcing clients.

Conclusion-What To Do

One thing you need to know is IT sourcing is becoming more competitive day in day out. That’s why there's an increase in the adoption of as-a-service options and intelligent automation, which facilitates IT service integration.

Due to that, a lot of IT business leaders are adopting a lot of competitive sourcing models where a lot of vendors want their business. In such a scenario, the champion is the one who delivers outcomes and transformative performance.

When the IT vendor leverages services integration and management, clients find it easier to work with them when they utilize shared methodologies and processes.

In recent years, the IT outsourcing budget has reduced according to computer economics. This is proof that organizations are either moving in-house or they want to more out of outsourcing. For instance, General Motors started when they said that they would hire more than 10k technology professionals. That way, they won't depend on outsourcing.

As this goes on, you have to know that manufacturers outsource a lot than any other sectors in the market. Well, that is a big dent in the market. What we have to do here is to keep adapting to the change so that we stay ahead.

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