Relationships between businesses and their outsourcing partners are changing from the traditional output-based approaches to more integrated and specialized arrangements.
Businesses around the world are embracing the digital transformation. According to the 2018 Digital Transformation Index, over 40 percent of companies said they had a dedicated digital transformation team in place. But what about the other 60 percent of companies?
Many organizations are turning to IT outsourcing partners to adapt to the rapid pace of technological change and remain competitive. However, relationships between businesses and their outsourcing partners are changing from the traditional output-based approaches to more integrated and specialized arrangements. The need for IT partners that can deliver the latest technical expertise through more flexible contract models is growing. Here's a look at how IT outsourcing partnerships are evolving to meet the digital transformation demands of today.
Demand for specialized technology partners
The digital skills gap is one of the biggest roadblocks to digital transformation for businesses. Outsourcing firms that provide deep expertise in artificial intelligence, for example, or technologies like blockchain are in high demand. A report from MIT Sloan found that 85 percent of respondents believe AI will play a significant role in their ability to stay competitive in the coming years. The number of blockchain-related LinkedIn job postings more than tripled in 2017. Businesses are increasingly seeking out specialized partners to meet their innovation goals, and as a result, many are opting to outsource to multiple, specialized vendors.
By working with multiple vendors, businesses can mitigate some risk. What's more, they're able to strengthen their competitive advantages by partnering with the most relevant and experienced technical teams. However, outsourcing to multiple vendors can be complex and lead to quality and delivery issues if not managed properly. Outsourcing firms that are capable of maintaining a wide range of specialized expertise under one roof may have an advantage so long as they can ensure high-quality customer support and meet promised delivery times.
Cybersecurity is now a primary concern for businesses of all sizes and in all industries. Nevertheless, staffing a security team is a daunting task due to the lack of talent. There are approximately 200,000 unfilled security positions in the United States alone, and an estimated 1 million open positions globally.
Beyond the need to fill internal cybersecurity roles, many organizations are also demanding security be a part of their digital transformations. Trust is now a leading factor when it comes to selecting the outsourcing partners businesses choose to work with and who they allow access to their data. Businesses are spending more time vetting their outsourcing partners, and opting to work with those that have a proven track record of following data and cybersecurity best practices.
Making room for automation
According to Gartner, intelligent automation is set to transform business outsourcing completely. Intelligent automation allows businesses to automate laborious tasks, including some IT tasks, in order to streamline their operations and allow their human staff to focus on more high-value work. According to Software Testing and Big Data Hadoop, approximately 10 to 20 percent of human work hours are spent on repetitive computer tasks. Researchers estimate that IT departments spend around 30 percent of their time on low-level basic tasks that could be automated easily.
Intelligent automation will lead to significant changes in outsourcing partnerships. On one hand, it may lead to a reduction in the number of staff required to complete IT projects. On the other hand, it's more likely to increase the demand for partners that can provide intelligent automation support in the short term. Businesses are starting to realize AI's potential to help them achieve their digital transformation goals and outsourcing firms that can provide affordable front- and back-office solutions may be able to leverage this demand for many years to come.
The evolution of contract models
"As-a-service" delivery models are revolutionizing the business services industry. Many organizations are turning to on-demand partnerships that allow them to access only the services or resources they need from the vast pool of IT service providers. This approach offers businesses more flexibility, often at a lower cost. That said, due to the on-demand nature of this model, faster delivery times do not always mean quality work. For now, traditional contract models are still used heavily for larger, more long-term projects, with on-demand models being used to cover more immediate, short-term development needs.
In addition to "as-a-service" models, outcome-based contract models are also changing traditional outsourcing partnerships. One of the biggest challenges for IT leaders is quantifying services. Therefore, contracts are shifting to be based on outcomes rather than outputs.
Outcome-based models are often more value-driven because they are based on measuring real metrics and results. This idea requires a strong relationship between the business and the service provider to truly deliver value and meet expectations. For instance, outcome-based models require a significant amount of strategic planning before starting a project, strong communication between both parties, and completely fluid exchange of information. Trust and transparency are key for an outcome-based model to work, resulting in a more reliable and consistent partnership that is often more rewarding for both parties.
A new age of outsourcing partnerships
While affordability will always be a factor when selecting an IT outsourcing partner, businesses are increasingly looking for partnerships that are security-driven, trustworthy and flexible. Only when a partnership meets all of these requirements can businesses free up more time to focus on their core business activities and their digital transformation goals.