Something to Ponder: Business Choices, Innovate or Outsource?

CIO‘s outsource for a variety of reasons: better service performance, lower costs, greater efficiency and, in a few cases, to be seen as the executive making an impact.

Irrespective of the rationale, most share a common expectation that their outsource partners will offer creative and innovative solutions throughout the contract. 
This was highlighted in a 2009 survey by Forrester Research which found that over 40% of organisations outsourcing IT services cited the lack of innovation or continuous improvement as their greatest challenge with vendors.

With most IT suppliers recognising that the development of innovative and creative solutions is critical to their success, where does the problem lie? Often it simply comes down to organisations not articulating what is expected by way of innovation from their outsourcing vendor. This can be resolved by drawing on a technique from the IT Service Management toolkit, namely the Service Improvement Plan (or SIP). The SIP can provide the basis for an innovative response provided that the requirement is well defined, the context is set correctly and there is a means of measuring success.

Defining the requirement

In other words, articulate the question to which you think innovation is the answer. To provide real value, innovation must be defined in the context of business objectives – it may be transformation efforts that improve shareholder value or create a level of strategic or tactical advantage. For business stakeholders, this could result in increased sales or improved customer satisfaction. Only with that level of understanding can an innovation discussion be clarified.

Speaking of innovation,  No longer is it just a matter of doing more with less; organisations are increasingly seeking growth through innovation, and cost -cutting in isolation is a game of diminishing returns.

In this environment, we’re seeing a move to smartsourcing.

Cloud computing and the growth in flexible, rich services it enables have transformed the concept of outsourcing, sparking an evolution in the way organisations think about flexible, cost-effective, project-based workforces.

Traditional outsourcing saw companies contracting out entire business functions or projects to external providers. Good while it lasted – and this kind of outsourcing will continue to play a role – but the advent of Cloud computing has brought with it the kind of flexibility, dynamism, scalability and cost-savings that traditional outsourcing simply cannot compete with.

With so much unpredictability in the current climate, why get bogged down in complex contractual arrangements or sign up for set, time-based projects when you don’t know what’s around the corner?

One of the greatest assets of Cloud isn’t just its capacity for driving down costs, but the way in which it enables the kind of on-the-fly sandboxing and experimentation that traditional outsourcing simply cannot provide.
In the past few years, many organisations have become used to consuming IT as a service; the utility model that Cloud supports could almost have been designed for organisations looking to cut costs without cutting back on their ability to innovate or scale.

Cloud computing allows organisations to streamline resources while retaining complete control over information resources. In this respect, the economic climate has been a catalyst for the growth in on-demand software, virtualisation, mobile technologies and infrastructure services, exposing some of the more negative, restrictive aspects of traditional outsourcing arrangements.

The complex contractual arrangements often associated with traditional outsourcing are in stark contrast to the flexibility of on-demand IT. Need more resources? Turn it up. Need less? No problem, scale back knowing that, should things improve next week, you can crank things up a few notches again.

This utility model has driven austerity-friendly pay-as-you-go payment structures. Because users can scale on demand, there’s no concern that you’re over-investing in a project that might not work. Costs per user, per instance are visible upfront, with no surprises. Watertight SLAs combined with technology that can be rolled-out on demand make it relatively easy for businesses to show their dissatisfaction with a provider by simply taking their business elsewhere with minimal disruption.

Cloud is re-defining the way businesses innovate and operate, giving them the freedom to experiment without the risks.

In this environment, outsourcing is a critical enabler of success. Experienced innovation firms use proven methods and tools to produce those crucial early-stage results, while also injecting the DNA of innovation process into the organization. Typically this outsourcing takes projects can range from R&D and engineering work, product and/or industrial design, to innovation process design.

Our company RenditionDigital International Ltd. has been providing the means for companies to achieve both  and scale based on demand without sacrificing risks involved. A proven track record with some the largest companies worldwide we can help you achieve both. For additional information click work with jay??

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Virtual Outsourcing vs. Traditional Outsourcing Providers

About a decade has past and there was a time where, an IT service provider could feel confident marketing itself based on two strengths—process expertise and scale. But in an age of cloud computing, virtualization and automation, staff size may no longer matter.

Even as HP’s fate once it sheds 27,000 employees is still up in the air, the headcount required to staff a successful outsourcing engagement is most certainly decreasing. And the days of outsourcing-related layoffs and the “lift and shift” of the remaining labor force to a third-party provider aren’t likely to return.

“The number of resources that a provider has on staff used to mean a lot more than it does today. The average outsourcing deal size is decreasing, while the number of deals continues to increase. The market is starting to realize that it is about engaging the provider with the best overall value proposition, as opposed to the biggest—or cheapest—provider.”

In today’s buyers outsourcing market, it’s outsourcing customers that may be driving this change. “Buyers are two steps beyond reducing headcount, while interested in a more efficient and effective service delivery, [they] are now seeking transformation.”

Someday “your mess for less” may be supplanted by “our processes, your people,” as customers seek out providers who can transfer their expertise and methodologies to the client’s existing IT staff. Where outsourcing providers used to say, “tell me what you do and I’ll do it (for you), or, better yet, give me your people so we can limit operational risk. The new approach is, I’ll tell you what is best and you tell me [whether or not it will] work. This new dynamic brings outsourcing relationships to a more advanced state.

The most mature providers are already pushing the ‘virtual outsourcing’ value proposition to their clients. Staff transfer is not a differentiating capability for the IT majors.

Indeed, most providers will resist taking on client staff today. Providers now have plenty of people and equipment so they are usually not interested in a transfer. When we see that these days (particularly in it deals), it is more of an accommodation than something that the provider needs in order to perform. And it’s one that comes at a premium.

In the application development and maintenance space-where labor arbitrage had been the big driver behind outsourcing-price is becoming less of a differentiating factor. And “with the advent of platform-as-a-service (offerings), buyers can now manage their own code-and staff-to build customer solutions. Providers are simply passing on the capability.

In the end, the extent to which a provider offers or simply transfers knowledge, service, and value to a client is highly dependent on the buyer’s IT and IT services maturity.”

Provider’s are pushing [virtual outsourcing] as one possible strategy, but we don’t see [many] customers ready to move forward with it. That could change in the future, but widespread acceptance of that model would take several years. These things aren’t yet happening in practice even if this is where we want to go.”