This year, the IT services industry saw customers doing more of their own IT services deals, testing the service integration model, and continuing to struggle with outsourcing transitions. CIO.com again asked outsourcing observers to tell us what they think is in the cards for the year ahead. And if they're right, 2013 could be the year customers—and a few robots—take greater control of the IT outsourcing space.
1. The Rise of the Machines
Say hello to the latest IT services professional: the robot. "2014 will see significant growth in the development and implementation of robot-like technologies that will automate many tasks currently performed by full-time employees in [outsourcing] deals," says Shawn C. Helms, partner in the outsourcing and technology transactions practices at K&L Gates. "Given the rise of robots replacing people in manufacturing and logistics, it is not a stretch to predict that robots will move up the intellectual value chain as artificial intelligence continues to develop."
"The rise of smart machines will have a radical effect on the IT and outsourcing environments," says Jonathan Crane, chief commercial officer for IPsoft. "What is still unclear is what either of these industries will look like in the end. Will these tumultuous changes have a lasting effect? Could this be the beginning of the end of the labor arbitrage era?"
At the very least, expect an increase in automation generally. "With the cost benefits of labor arbitrage being largely harvested and labor costs inevitably on the rise, CIOs will need to look for alternative opportunities to reduce or contain operating costs," says Joe Nash, principal in Pillsbury's global sourcing group. "That means looking for ways through automation to reduce the amount of work it takes to complete an IT function or service, not the cost of the labor to do it."
Process automation will become integrated with service provider solutions this year, says Chip Wagner, CEO of IT outsourcing consultancy Alsbridge.
2. Hybrid Offshoring Heats Up
"In 2014, offshoring to a supplier will not be the default," says Atul Vasithsha, chairman of outsourcing consultancy NeoGroup. Rather, a hybrid model, combining insourced and outsourced offshore services, will gain attention as an alternative.
"Companies are starting to invest more in global business services models, [which combine] the best of shared services and outsourcing under a common governance model. This is seeing processes being offshored in captives by industries that have traditionally been reluctant, such as media and entertainment," says Vasithsha.
Indeed, this year will see a mix of outsourcing models overall. "Most companies need to get the right combination of best talent and most-cost-effective IT services," says Scott Staples, president of Americas at IT service provider Mindtree. "The best sourcing strategies treat outsourcing and insourcing as complementary not competitive, and leverage onsite, onshore, offshore and nearshore options all in the same model."
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