IT outsourcing is being transformed, but do the outsourcers understand?

Posted: 12/07/2016 - 00:28

The Register likes to put the boot in when they comment on IT stories, so it was no surprise to see a recent feature about Fujitsu in which The Register summarised that Fujitsu needs to "get a move on" if they are going to transform their business to meet the expectations of customers today.

The Register has a point, but to be fair to Fujitsu, at least they have acknowledged that IT outsourcing is a very different business to how it functioned just a few years ago. Fujitsu says that they are transforming their business because security, artificial intelligence, the cloud, and the Internet of Things are reshaping how modern IT infrastructure works.

All of this usurps the traditional role of the IT outsourcer or internal IT development team. In more traditional environments there would be a business customer that needs a solution for their area of the company. The CIO would offer analysis and development for those business customers, sometimes performed in-house and sometimes with an external partner through an outsourced arrangement. Sometimes a solution would be designed and built from scratch and sometimes an existing system could be purchased and customised.

That’s the IT world we all know and many IT companies have grown wealthy by delivering these services to clients, but I would suggest that IT outsourcing today is really being reshaped by three elements:

1. Cloud. 

This is enormously important. Delivering cloud-based services is not just about storage or processing power on demand; business solutions can also be delivered and charged as they are used removing the need for local software administration and development. For example, a marketing team that previously might have needed some internal tools developed can now find almost all the support tools they need on a subscription basis in the cloud - look at tools like Hootsuite for an example.

2. Apps.

The app store has revolutionised how people use applications. Apps are easy to find, install, delete, and are regularly updated seamlessly. End users don’t need IT expertise to find an app that helps with their area of the business because they can find and install it themselves in contrast to the tight management of apps that used to be common.

3. Both the above mean that the customer has changed.

IT companies don’t necessarily need to be talking to the CIO for business solutions if the CIO is just ensuring that the right infrastructure is in place for business users to use cloud-based apps. It is the business users who are buying IT solutions and they don’t want multi-year contracts, they want to pay by the users and only for what is used.

Even if you are a traditional IT supplier with some fat government contracts, how secure are they in an environment where even the public sector has been exploring cloud-based solutions for several years?

Some IT outsourcing will remain in the traditional format of a long-term contract from a client to supplier, but it is likely that these deals will be much more around infrastructure - ensuring that the business can keep the apps up and running. Deciding on the IT that will support business processes is already being devolved to business heads and both the development and charging models are being transformed.

IT outsourcing is no longer about how many developers you can bill from a remote offshore location. It’s about offering solutions in a format that customers can easily download and use and with easy options to pay for the value that the app creates.

What do you think when you hear about transformation plans inside big IT companies? Do they really understand how business heads want to purchase IT services today? Leave a comment here or tweet me on @markhillary.

About The Author

Mark Hillary's picture

Mark Hillary is a writer and analyst with an extensive track record of contributing to business media and opinion all over the world. He has written for the BBC, Financial Times, and Huffington Post with a focus on CX, technology, and the future of work. He edits the podcast and online magazine CX Files, focused entirely on best practice in customer experience. Mark has published 15 books on technology and has experience teaching MBAs in London and speaking at major conferences on five continents. He has advised the UN on technology development in Nigeria and Bangladesh and has helped several governments with the development of ICT related policies. He was an official London 2012 Olympic blogger and was the first ever blogger hired by the British government's department of education in 2010.