Gone are the days when a large, long term, multi-million dollar IT Outsourcing Deal was considered as a strong exclusive relationship between the outsourcer and its IT service provider(s). After all, there was a lot at stake. However, with the advent of Disruptive Technologies and Digital Era, business dynamics has changed for
Communication Service Providers (CSPs). Exposed to mounting pressure from competition, shrinking margins and changing consumer expectations, it is obvious that old rules of the outsourcing game do not effectively apply anymore to the realities of today. Hence, when long term business relationships come with an expiry date clearly defined in your contract, what do you as an IT Service Provider do to ensure everything works not only for you but for your customer as well? You transcend, you try to go beyond the expectations and deliver Value which surpasses all expectations.
Let us first understand how the expectations from CSPs outsourcing their IT business have evolved over time. Earlier, the key driver for outsourcing was to control and reduce operational expenses. But over the period of time several other factors have gained prominence. The decision of outsourcing attaches special significance in the strategy formulation, and, CSP’s are now looking at their IT service providers not simply as low-cost outsourcers, but as integral part of their strategic business capabilities. A study from Informa Telecoms & Media recently found that 85 per cent of CSPs see the development of new revenue streams as their key objective, and, by association they expect this from their IT service providers.
IT service providers are becoming more closely tied to the business outcomes of their customers, and a select few move up the value chain to take on the role of strategic partners. There is more contemplation on “Perceived” as well as “Derived/ Outcome” based value. While Perceived Value comes from a product or service delivered; the Derived/ Outcome based value is reflected through the measureable KPIs. It’s not as much about just accessing low-cost labour these days. It is also about agility, innovation, value delivered, flexibility to control investments and resources, risk and reward sharing, acquisition of special skills and competencies, and, establishing long term strategic relationships.
Thanks to the maturity of the offshoring lifecycle, there are now benchmarks to choose service providers. Some parameters in the evaluation criteria are ability to execute, out-of-the-box thinking, vision and thought leadership amongst others. CSPs now demand great domain knowledge and stress on innovation to leapfrog ahead of competition and good relationships with a strong IT service provider allows them to do that. Thus, an important step towards CSP outsourcing is to create a win-win partnership with the IT service provider covering a holistic view of all operational elements:
- Business Strategy in Alignment with Managed Services Strategy: Integration between the organisational elements such as processes, technology, organization and people along with integration of IT and telecom services and their associated resources such as cloud computing, web services, etc. requires an integrated management approach. Such an approach should address the interdependence of real time event correlation/outage resolution, performance analysis, capacity planning, and change management across the IT/telecom/security continuum. This is becoming more of a key element in managed services deals and will be more so in the future.
- Moving from pure cost-cutting to focusing on Innovation: Data from Forrester’s Forrsights Services Survey showed that the need for companies to innovate and grow their business now has a higher IT services spending priority than the need to lower their IT operations costs. For IT services providers, client value is being redefined — from “delivering cost savings” to “generating business value through innovation,” the latter of which is the main value proposition of solution accelerators. This includes launching industrialized solutions, preferably based on cloud technology for efficiency, cost reduction and better control from a single point.
- Collaborative Innovation and joint Go-to-Market Solutions: As CSPs embrace mobile devices and apps to empower their customers, employees, and partners, they need their IT services partners to lead them through the accelerated pace of change. In this complex business and technology world, Co-innovation initiatives around software assets will become more prevalent.
- Going Beyond IT: The interrelationships of cloud, mobile, social, and business analytics are disrupting the precarious business/IT equilibrium. As business rules are rewritten to embrace these new technologies, IT service providers will have to undergo a major transformation in order for their value proposition to remain relevant to their clients. Going beyond IT to cover a wider range of solution and services, such as Digital and Value-Added Services will help in long term.
In conclusion, the pace of change in the IT services world is greatly accelerating and transcendental outsourcing is the new mantra for success. Technology innovation no longer comes in successive waves. IT service providers need to build an eco-system of inputs that are going to be required to service the CSP's needs. They need to transcend to prove their relevance, even in the current partnerships. This is so, because today, an IT service provider who is being called upon to provide business capabilities on a tap will be in no position to build the capabilities on the fly and deliver as per client’s expectations. As the world moves to becoming "IT enabled", CSP's will look for those IT service providers who understand the impact of technology on the consumers and the ability to build that eco-system which will be key for the survival and growth imperatives of the CSP.