From an article in the December 4, 2018 edition of CIO Magazine titled “7 Hot IT Outsourcing Trends – and 7 Going Cold”….
Cooling down: Traditional sourcing models
Old-school outsourcing has been under fire for some time and the steep decline in traditional approaches is expected to continue. “Digital services and the as-a-service model continue to offer enterprises more bang for their buck, alongside scalability and adaptability,” says Snowdon of HfS Research. “But we’re also seeing commercial models catch up and pricing is starting to more readily align with client outcomes. These new pricing models don’t sit well with traditional outsourcing, signaling another blow to an already struggling model.”
Heating up: Onshore digital services
There’s no question that digital transformation is driving most IT decisions today. “Every conversation started and ended with digital this year,” says Hall of ISG. “Costs saving were interesting, but the market was defined by significant investments by the business and IT to all things digital.”
One result of that is that outsourcing IT functions closer to home is very much back in vogue. “Enterprises want to be part of their digital transformation journey and there’s an appetite for getting ‘hands on’ in the ideation and development of solutions,” says O’Donoghue of HfS Research. “For providers, this has meant building capabilities onshore and nearshore to facilitate a more tactile approach to service delivery that they would struggle to offer through traditional offshore models.
However, that doesn’t mean offshoring for cost savings is dead. “Right-shoring of labor may not be a popular topic to discuss; however, many organizations are still wrestling with suboptimal project engagement and operating models as there is an over-indexing of resources to higher-cost IT service locations close to business delivery center and their major marketplaces,” says Pace Harmon’s Wright. “Shared services in the form of Global Delivery Centers (GDCs) or through third-party outsourcers is still a major source for cost-optimized IT delivery capabilities.”
