Multisourcing — parceling out the IT services portfolio among a number of vendors — is the new normal in IT outsourcing. And as social, mobile, analytics, and cloud (SMAC) services become increasingly important to the IT environment, companies will find themselves managing an ever larger pool of smaller deals that are, in many ways, different from their traditional outsourcing relationships.
And, says Lois Coatney, partner with outsourcing consultancy Information Services Group (ISG), that's just the beginning of the added complexity these relatively nascent technologies are bringing to outsourcing customers.
"Integrating SMAC technologies increases the number of providers involved in the service delivery chain. Moreover, the new providers are delivering new technologies and have different business models, and this further complicates matter," Coatney explains. "So it's not just a matter of bringing more providers into the mix. It's bringing in a new set of players who do things differently."
As a result, maintaining an integrated or standardize environment becomes more difficult. And, says Coatney, "the established rules don't necessarily apply."
At the same time, SMAC technologies are generally built on top of shared, multi-tenant platforms, which means that contract terms, service levels and pricing units are actually highly standardized and biased in favor of the supplier. "Negotiating these agreements can present a challenge, especially once the provider gains scale," says Coatney.
Outsourcing customers are used to having their IT suppliers adapt their processes and requirements, not the other way around. "What happens is that clients have to fit into the provider's contract structure rather than making the supplier fit into theirs," says Coatney. "So, in addition to managing disparate processes, service levels and pricing units, there's a new set of challenges for procurement, legal and vendor management, who are accustomed to dictating their standards to providers."
Also, Coatney says some SMAC vendors sell discrete solutions to multiple parts of the business — sometimes excluding the centralized IT function — causing further disparity across the environment. "Because there are so many emerging SMAC products, they are being applied in a fragmented approach," explains Coatney.
IT Leaders Need SMAC Strategy
Exacerbating these issues is the fact that most traditional IT service providers have been in a state of denial about the impact of SMAC technologies even as their clients faced pressure to apply these new capabilities to innovate and drive change, says Coatney.
"That's changing as the provider community has recognized that the SMAC technologies aren't going away, and in response they're embracing the new capabilities," Coatney says. "We see traditional providers increasingly highlighting their capabilities around cloud, automation and big data because they see that such capabilities are going to provide a critical competitive edge."
Sign up for CIO Asia eNewsletters.