Cloud // Software as a Service
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12/17/2012
12:52 PM
Eric  Lundquist
Eric Lundquist
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7 Ways Outsourcing Has Changed

The old role of outsourcers -- doing repetitive stuff overseas because it is a lot cheaper -- is history. See what's coming to take its place.

I was driving back from a dinner with Shami Khorana, president of India-based outsourcer HCL America, after a HCL customer event in Boston recently when I started thinking about how the concept of technology outsourcing has changed in the past year, and ways it will continue to change in 2013. HCL is playing a role here, and I'll get back to it and its initiatives in a bit. First, here's my list of seven changes that are impacting how we view and use outsourcing.

1. Outsourcing Within Your Own Company

CIOs have watched their technology budgets march off to other departments, notably the marketing department to implement social networks, the sales department to implement customer resource management, and most recently the human resources department to implement human capacity management. Chris Murphy has a good analysis of the CMO becoming a technology purchaser. I've argued that this dispersal is not a bad thing if the CIO still functions as the hub for privacy, compliance and the solution to tech chaos.

2. IT Loses Outsourcing Control

Those sales execs, HR bosses and CMOs have, in turn, outsourced their tech needs to service providers such as Salesforce.com, Workday and Hubspot, respectively. This outsourcing was the result of a realistic look at their primary job responsibilities. For example, the CMO's job is to get marketing and brand management right, not to be a software developer.

3. Outsourcing Hardware

IT departments have outsourced their role as employee hardware providers to Apple, Google and whatever other device catches the employee's eye. This BYOD-driven outsourcing has fundamentally altered the role of IT as the giver and taker of employee tech. Again, it's not a bad thing, but it does alter the IT department's role from hardware supervisor to gadget software administrator, responsible for figuring out how to keep the corporate data secure in a BYOD free-for-all.

4. SaaS, PaaS And IaaS

Software-as-a-service is a little easier to understand in that (as in the example of Workday or Salesforce.com) the model is fairly well defined. You sign up for the service and pay on a subscription basis. Platform-as-a-service has a lot of definitions, but I consider it more in the application layer where a lot of the nitty-gritty details of application development and deployment are taken on by the service provider, while the customer still has a responsibility on the infrastructure provisioning.

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Infrastructure-as-a-service falls into the pure-cloud category in my thinking, and is designed for the customer to eventually put its entire technology infrastructure onto Amazon, Rackspace or whichever vendor provides the best mixture of cost and comfort. While the capabilities around these services have been building since, yes, the timesharing days, in 2012 (and in particular on Amazon) these outsource options have become real for a wide range of customers. Charles Babcock has a good analysis of the latest Amazon push into the enterprise.

5. Crowdsourced Outsourcing

Want to find someone to tune your website, head over to Elance. Need an enterprise-level crowdsourced outsourcer, head over to Lionbridge. If you're looking for a keynoter for your event, visit Speakerfile. Check out the recommendations for a prospective new hire, go to LinkedIn. And on and on. Those wondering when crowdsourcing, popular in the consumer space, would hit the business world should stop wondering and start using the many outsourced, crowdsourced business services now available.

6. Tech Vendors Cash In On Outsourcing

Dell made its name assembling custom hardware ordered over the phone or online, getting paid for those boxes before they had to pay the suppliers. This was a very good business, but as founder Michael Dell recently told InformationWeek, those days are being eclipsed by Dell the services company. Building boxes was a decent business for HP also, but not so much anymore.

Cutting a deal between the box builders, the operating system developer and the chipmaker was a great revenue triad for box builders, Microsoft and Intel. Those days are gone, vaporized by the onslaught of Apple, Google, Lenovo, cloud vendors, tablets and smartphones. Dell is recasting itself as a services provider. HP is still trying to figure out what to do and Microsoft wants to have it both ways, selling the software and the hardware. It is hard to see this story having a happy ending for all the vendors, but turning your company into an outsourced services vendor is the best choice out there.

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Mahima
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Mahima,
User Rank: Apprentice
12/21/2012 | 6:06:48 PM
re: 7 Ways Outsourcing Has Changed
Outsourcing today has changed drastically. There is a shift in focus from the front end to the back end of the transaction, especially the post contract signing. Leaders from the outsourcing industry are slowly embracing these changes and focusing on governance and relationship management--a critical success factor for any outsourcing relationship!

Not only the operational and strategic models are changing, but there is clear divide in the preferred outsourcing destinations also. Here's a rundown on the emerging nearshore/offhshoring destinations: http://www.minacsblogs.com/Exp...
TechYogJosh
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TechYogJosh,
User Rank: Apprentice
12/19/2012 | 10:10:51 AM
re: 7 Ways Outsourcing Has Changed
Eric, are you just rephrasing and rehashing information that is already available publicly and told millions of time by millions of people? I mean do you think that earlier if a sales wanted a CRM or HR wanted HRM solution, they would go to IT and IT will use its own budget to buy and deploy these solutions? Of course not. Any new application/initiative was always funded by the business unit and that has not changed. So I am not sure how to interpret you comment that IT budget is moving to sales for CRM purpose or to HR for HRM purpose etc. These departments always had their budgets with which they would fund technology initiatives (e.g, deploying CRM or HRM) and ask IT to lead it. Correct me if I am wrong.
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