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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.

7. Outsourcing The Enterprise

Businesses that rely on employees to come to work in a brick-and-mortar headquarters are at a disadvantage compared to companies with a mobile workforce that engages with customers worldwide. The ability to use outsourced services in your customers' locations is an advantage not to be discounted. Mobile computing has created an era of workforce outsourcing, and also one of the CIO's trickiest problems: How to provide services, but still ensure security for the mobile workforce.

I could go on, but the old outsourcing model is in a big transition. The original idea, which I called "doing repetitive stuff overseas because it is a lot cheaper," was probably a model doomed to be deconstructed. Outsourcing customer service was never a good idea. Customers are your source of revenue and new ideas, and you really don't want that knowledge to go away. This original model of outsourcing led to the rise of the big India-based outsourcers, as well as heated arguments regarding job displacement, and was based on more of a business process shift than a technology shift.

As 2013 approaches, I think you will see more outsourcing due to a technology shift, as executives recognize they don't have the internal skills required to accomplish the technology projects their companies require. Mobile, social, cloud computing and big data constitute the big four drivers for business tech in 2013.

-- Mobile development requires a new application design, development and deployment process that few enterprises now have. Consider the rise of the consumer-friendly user interface, the app store deployment model, and the need for responsive content management systems that adapt to various devices. These require expertise not readily found in the enterprise. I'll correct that: The skills may be found in the enterprise, but more likely among the company interns than the company developers.

-- Social network deployment and activity monitoring takes place outside of IT, if it takes place at all. In reality, a lot of social network deployment tends to be ad hoc, and monitoring tends to be after the fact rather than a forward-looking activity.

-- Cloud computing requires a total rethink of the corporate technology infrastructure. The idea that a company would go through three stages of cloud adoption was popular a year ago. You'd take your current infrastructure and create a "private cloud," and then you'd sprinkle in some services to create a "hybrid cloud" and eventually you would graduate to a "public cloud." This was a good plan for vendors looking to bring customers along on a long, slow and expensive process. If your final goal is to be in the public cloud, you can get there a lot faster by skipping the interim steps.

-- Big data and big data analysis are gaining importance, but we lack the requisite skills for it in today's corporate technology departments.

Outsourcers would be wise to deliver the services to fulfill these four drivers, rather than merely doing stuff cheaper. HCL refers to the unfolding corporate drivers as a combination of social, mobile, analytical and cloud (SMAC) development.

"As an outsourcer you conceptualize and you develop expertise ahead of the game," said HCL America's Khorana. "You don't just create expertise, you actually create solutions around that expertise. It is not very easy for an end-user organization to develop those skills."

What may be the most surprising outsourcing trend shouldn't be a surprise in light of the rancor and political posturing that often accompanies a company's decision to outsource services. While I have yet to see anyone protest a company's decision to outsource its infrastructure to Amazon, the decision to outsource to an overseas provider is one where questions around job development and downsizing are sure to be debated. In a development I'd call onshoring, companies like HCL are hiring and developing business operations in the U.S.

Last January, HCL CEO Vineet Nayar outlined plans to hire about 10,000 workers in the U.S. and Europe. You can track HCL's hiring from its U.S. operations website. Outsourcers hiring in the U.S. are developing employees with skills that their customer employee base does not have. This may provide the closing loop of the virtuous skill circle, and could be the biggest outsourcing story of 2013.

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