Today's blog on IT trends comes from Mike Slavin, Partner & Managing Director, CIO Services North America, TPI
It has become commonplace for CIOs to ask about current or upcoming IT trends that may impact outsourcing agreements. I tend to answer such questions based on two factors relevant to companies active in outsourcing – the types of IT services used and the IT outsourcing strategies deployed for enterprise.
First, one must consider the types of IT services available for enterprises. The emergence of "cloud computing" as the IT industry's consumption-based, utility-oriented service solution cannot be ignored (10 Cloud Computing Predictions For 2009, InformationWeek). Recent initiatives of a similar nature have not delivered on the promise of a truly variable cost for infrastructure services, but the under-achievements of the past should not encourage complacency among organizations. There are several endeavors underway to bring to market ubiquitous classes of IT services meant to offer favorable pricing in return for adoption of standard utilities.
Beyond infrastructure services, trends are developing around platform-based services that allow for greater consideration of "managed services" operations as a silo-breaking alternative to proprietary applications development. Most industries, including the healthcare Payer community, have for many years used a model through which investments are made in custom/unique business applications. As a result, it is not uncommon for a Payer organization to use hundreds or thousands of business applications throughout the enterprise and not know how many software assets exist throughout a company network. Such is the complex nature of most legacy environments.
In both scenarios - infrastructure services and applications development - fundamental questions are being asked about the merits of building versus buying the functionality required. Changes to operating requirements are forcing organizations to rethink the merits of current investments. These changes are precipitated by regulatory activity and economic motives to simplify and standardize business processes.
One trend that has the potential to materially influence an IT outsourcing strategy involves taking a holistic approach to considering whether to buy a service or continue to invest in building ones own. The criteria for such decisions vary, but TPI has put forth a framework for evaluating these alternatives called the 3C Framework for Successful Sourcing Strategies.
Another trend influencing IT outsourcing strategy relates to contracting form. This dimension is driven to a great degree by the previously mentioned build-vs.-buy strategy, but also considers the degree of transformation implied by the sourcing initiative. We see contracting terms for IT services settling in the range of 5 years, and a continued emphasis on best-of-breed providers.
Both factors demand that clients adopt a highly capable sourcing management competency as a core for their organizations.
Today's market economics are expected to yield even more changes in the service provider community, with consolidation likely among certain provider classes. Further, we envision other market endeavors, such as joint ventures and divestiture of captive operations to create greater options for clients. It is important that the form of today's contracts allow for taking advantage of future opportunities if/when they arise.
