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Grading our 2016 IT outsourcing predictions

Stephanie Overby | Dec. 19, 2016
We predicted this was the year that security and integration challenges would become key considerations, companies would embrace robotic process automation and offshore captive models, and the IT outsourcing contracting process would become more agile and accommodating. Now it's time to revisit our predictions.

Companies are investing time in due diligence up front. “This strategy ensures their outsourcing investment will pay back in multiples on the back end,” Tanowitz says. “The philosophy of a dollar spent now saves ten dollars later applies, especially when assessing major technology alignment throughout an organization.”

Still taking shape

VMOs go mainstream

Multi-sourcing has certainly multiplied the vendor management workload, but IT organization are still trying to figure out their vendor management strategies.” “Multi-sourcing is likely here to stay, bringing along with it a host of vendor management challenges,” says Tanowitz. “As such, enterprises will continue to look for new ways to proactively address vendor management, including outsourcing functions like SLA calculation. We see this trend picking up steam, but it isn’t mainstream yet.”

“Having some centralized VMO personnel experienced with services deals—not just buying nuts and bolts—is becoming critical,” Strichman adds.

“We also saw a countervailing trend in 2016 for targeted specialized services, which we find are being managed by the business units using those services,” adds Paul Roy, partner in Mayer Brown’s technology transactions practice. “The key differentiator seems to be enterprise vs. specialized services.”

Automation will redefine relationships

As the advantages of the labor arbitrage approach to cost savings dwindled, we posited that automation would change the game in IT engagements and suggested that both customers and providers will have to rethink their deals to integrate more robotic process automation (RPA) and robotics into their service delivery.

It’s true that RPA and other forms of automation will be game changers in the industry. “While initially viewed as another labor arbitrage opportunity focused on reducing FTEs and cost, RPA has demonstrated the ability to have a direct impact on speed to market, accuracy and quality, customer satisfaction, compliance and auditability, and is emerging as a key differentiator for both buyers and providers of sourcing services,” says Craig Nelson, managing director at ISG. However, RPA is still in the earliest stages of adoption, says Tanowitz. “It has not moved the needle as of yet for outsourcing customers.”

 

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