The old outsourcing model is dead. We hear it all the time, year after year, yet the percentage of companies that outsource remains stubbornly stable. In fact, the urge to outsource while transitioning to cloud-based delivery is stronger than ever. Even today, Forrester works with clients seeking to outsource IT operations for the first time.
Despite its stubbornly stable reputation, outsourcing is changing. I recently issued a report, The Future Of Technology Outsourcing, that digs into the evolution of technology outsourcing. But take note: This isn’t a radical shift. In fact, to say so is markedly false. Some things remain resistant to change, including the classical “core versus context” argument, reliance on service-level agreement (SLA) mechanisms, and the search for business impact and innovation through outsourcing. But other things are changing, including adaptation to experience-based metrics of delivery, adaptation to product and platform teaming structures as atomic elements of outsourcing delivery, and ever-higher degrees of automation, which redefine scope and eliminate otherwise manual work.
Instead of a sudden sea of change, outsourcing customers should consider the following trends as “dials” to adjust as they make their way to modern outsourcing delivery:
- Product/platform teams. Advanced teaming structures are becoming more common and promise to transform outsourcing delivery by unifying the historically separate applications and infrastructure stacks.
- Outcome-based pricing models. Outcome-based pricing in services relationships has been a bit of a holy grail, more honored in the breach than observance. Expect incremental progress, not an overnight transition.
- Co-creation. Advanced delivery models such as agile development and DevOps are resistant to traditional contractual guarantees. In the new era, the customer and the supplier need to work effectively together in a partnership of trust. To succeed, co-creation has to be more than mere lip service.
- Automation has been “the next big thing” in outsourcing for some years now, but it has gotten to the point where customers are expecting to benefit from reduced scope and lower costs through elimination of work. The automation landscape still remains fragmented but will represent an ever-increasing focal point for outsourcing suppliers.
- Experience-driven. Finally, employee experience has achieved enough velocity to represent a real trend in sourcing, as opposed to a fad. Emphasis on experience as represented by the so-called experience-level agreement, or XLA, has already transformed workplace services delivery and will eventually move up the stack.