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Jun 23, 2015

Tech Outsourcing is on the rise. So are client expectations.

Author: Alexandra Stanculescu

LinkedIn is in the middle of their #MyIndustry campaign, and I felt this was a good opportunity to sum-up some of the changes and trends me and my colleagues have noticed, researched and discussed throughout the year. Let’s look at the state of technology outsourcing together.

Steadily and surely, the technology outsourcing industry is growing. Deloitte reports ITO drives over 60% of the total sourcing market. So while it’s obvious that this trend is here to stay, the industry is also seeing radical change – brought on by the recent advancements in technology (such as Cloud computing), which in turn triggered a change in clients’ perspective and demands. Clients want more from their outsourcing collaborations, and their expectations are more specific and better documented than ever.

We see this in the requests for proposal we get, which have gone from one-pagers to short novels in just a couple of years; we see this in the collaboration models and working methodologies our clients favor today, vs. those they used to favor just a few years back; we see this in the metrics our collaborators choose. Four years ago, we had to persuade our clients that working Agile will be better for both of us; today, we have to persuade our clients we’re better than anyone at working Agile.

Better technology, used better

For most companies, technology outsourcing used to equal cost reduction; this was the main drive behind a company’s decision to outsource. As a result, many collaborations lacked vision, their potential reduced to a single metric. They were the days of cheap, doubtful-quality software, and awkward, language-compatibility-lacking meetings. As an outsourcing provider, it made little sense to go the extra mile and deliver real value via other metrics, because real value is seldom cheap enough to be competitive when cost is the single most differentiator.

We’re starting to see things differently today. While cost is, of course, important by default to anyone considering a major purchase, the main incentives to outsource are starting to gain perspective.

Non-technical companies are now interested in turning technology into an engine for growth and efficiency, instead of just seeing it as a cost-and-time-demanding tool they can’t do without. For non-tech businesses, main gains are scalability and flexibility; security, uptime, reliability and disaster recovery; easy provisioning and updating; customization of internal applications in interest of increasing efficiency, and reduced aministration time and/or automation.

For technology companies, most important benefits of outsourcing are efficient access to skilled professionals and state-of-the-art technology; increase in quality; flexibility in scaling their team up or down as needed, and faster time to market.

Technology advancements, and their respective increase in popularity, have made everyone realize they must leverage their full potential in order to stay competitive. That’s why we, the outsourcing providers, stay competitive in turn by responding to the natural escalation in client demands – after all, if I’m going to pay more for better technology, I also want to see it being used better, in a future-proof way.

If all you do is build it, they won’t come

The marketing cliché is becoming an actual strategic perspective: in order for me, the outsourcing provider, to stay competitive in my industry, I must focus on helping my clients gain competitive edge instead. Clients are demanding more from their providers. They want high and flexible service level agreements and predictable costs. They’re concerned with managing business-critical applications, finding future-proof IT infrastructure solutions, and achieving better inter-department collaboration – and we must anticipate and ease these concerns with proven solutions.

How do you feel about the changes in the technology outsourcing industry? Clients and suppliers alike, I’m interested in hearing your thoughts. We’re working on a whitepaper to answer some tracking-and-measuring-progress apprehension regarding outsourcing collaborations, so tell me what you’d like to know – and stay in touch with us to find out when and how you can access our luxury free content.

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