Many people have high expectations for 2016, and I am among them. The European Space Agency and the Russian Federal Space Agency will send an orbiter to Mars, the summer Olympics will take place in Rio de Janeiro, and this year is a Leap Year. What does 2016 have in store for the sourcing industry? The predictions abound. Here are my top ten.
- Automation of manual, rules-based work will accelerate at a rapid pace. The subject of automation received a great deal of ink on newsprint during 2015. Be prepared for it to do so again this year.
- Cognitive computing will continue to see broader cross-industry pilots with some clear capabilities and success stories established in a few. IBM has already begun extending pilot projects that deploy software robots in industries beyond healthcare, including banking and insurance. This year, specific industries should see some degree of clarity on the solutions and benefits of these investments.
- More workloads will shift to private, public and hybrid clouds. This trend has already been established but will continue to build steam going forward. Cloud models that provision IT-as-a-service are gaining maturity, and enterprises are beginning to shift their stance from “whether to go to the cloud” to “how to get there.”
- The start-up economy will remain vibrant with Internet technology-led business models springing up in new segments of convenience and value. In other words, we will see more firms introduce innovative business models (like Uber and Airbnb) that will disrupt either existing industries (like taxi services and hotels) or find new sources of value creation.
- Outcome-based sourcing partnerships will become more prevalent. This year will see an increase in the expectations customers have of their service partners. They are looking for more than just people, solutions and ideas. The name of the game? Show your appetite for risk.
- Competitive intensity for traditional sourcing business will not abate. Pressure will remain on pricing for managed services. Data suggests an increasing number of providers are competing for a growing number of sourcing deals and this trend is expected to continue.
- M&A activity in the sourcing industry will accelerate, increasing in number and value.Service providers will continue to consolidate in search of synergies in domain, service segment, consulting capability or regional presence. We will also see continued activity in acquiring start-up product companies that have the potential to transform/disrupt specific industries.
- The traditional business process outsourcing (BPO) model will come under threat. The BPO industry is increasingly driven by technology; demonstrating tech prowess will be essential for those providers who want to keep and grow their customer base in 2016.
- The volume and skill required by providers will undergo a shift. The number of people hired by service providers is far less relative to the historical trends of hires for each dollar of incremental revenue. The requirements for skills are also changing as providers need more people on the higher end of the food chain to design, analyze, create, innovate and think.
- The role of the CIO will lose its haziness. The CIO will be a facilitator of technological adoption and change within the enterprise. The successful CIO will commit a great deal of his or her time in 2016 to creating a master enterprise architecture and to improving security. Of course, he or she will also need to keep a keen eye on the horizon for how the latest solutions and technologies can enable the business.
ISG helps companies and CIOs prepare for the future. I welcome your additions to the list and the opportunity to discuss them. Please contact me to keep the discussion going.
About the authorDinesh is a highly experienced and well-respected advisor in the outsourcing industry with more than 23 years of experience in management consulting and outsourcing. He works with enterprises to craft sourcing strategies, structure and negotiate complex sourcing transactions and design and implement sourcing governance organizations. Prior to joining ISG, Dinesh worked with Infosys and Accenture, where he led large transition programs and consulted on IT strategy and implementations, business process-reengineering and operational improvement programs. He is a published thought leader and a regular speaker at industry conferences. Dinesh manages the ISG India Business.
