Three outsourcing trends to look out for in 2023

The market for IT services is strong. The sector continues to grow despite multifaceted crises, including rising energy prices, which contributed to a seven percent increase in service provider contract fees in Q3 2022 (compared to Q3 2021).

However, major changes are occurring in sourcing practices. We are seeing traditional infrastructure projects, which have long been providers’ core business, take a back seat. Instead, the aspects of the sourcing process that directly contribute to creating value for the enterprise client are now prioritized. As a result, we are seeing the terms, objectives, and norms structuring relationships between enterprises and IT service providers change at a staggering pace.

As organizations further digitize their legacy systems and processes, we are seeing new requirements for process design that closely aligns with the innovations the IT industry is creating. The need for consistency in sourcing is ever increasing. In 2023, organizations will need to continuously restructure the performance requirements of existing partners and incorporate new service providers into the existing partner ecosystem where necessary. We will also see an increase in the number of internal stakeholders who will have a say in IT design. Therefore, promoting collaboration between the client’s IT function, the business itself and service providers will be a key success factor for effective sourcing.

Trend 1: Business Process Outsourcing (BPO) providers will focus on value for customers

Traditionally, back-office processes (such as accounts and HR) were the domain of BPO providers, but as more of these processes are digitized, BPO providers are looking for new ways to deliver value to clients outside of their core areas. Banks and insurance companies are among the fastest market players to respond to these developments. The range of outsourced value-creation processes is increasing and, in some cases, extending to core business processes such as lending. Authentication of end customers is seen as a particularly attractive feature when choosing a provider.

Client companies’ sourcing teams need to expand their horizons as providers diversify their offerings and expertise. The priority is now determining how service providers can add value to the company. As we move into 2023, we’ll see more sourcing teams develop an outcomes-based mindset – one that will help them determine what services and process support they need to support their business goals.

Trend 2: Digital engineering is becoming an IT services subject

Research and development (R&D) has traditionally been considered a value-added service by service providers, related only to infrastructure and development services. Actual R&D value was the responsibility of the client’s engineering organization, which assigned selected project tasks to specialist engineering firms based on the type of development required. Responsibility for the outcome of the engineering project rests with the enterprise, not the provider.

The Industrial Internet of Things (IIoT) is changing that. Clients now want service providers who know how to meet the diverse needs of IT-OT convergence, as IT solutions become more networked with operational technology (OT). Many large IT service providers recognized this need early on and expanded their OT capabilities through acquisitions and people development. Those who have done so have placed themselves in a good position to offer engineering-as-a-service, which goes far beyond the services of specialist engineering firms. These digital engineering providers can work with industrial clients to develop business models that allow them to implement IIoT innovations in a marketable way.

We expect service providers to focus on expanding their operational capabilities. They must acquire substantial industry-specific knowledge of relevant valid regulations or industry standards. The more successful these providers are at building this expertise in-house, the more they will be able to manage the entire lifecycle of IoT services and take responsibility for the results.

Trend 3: Outsourcing Cyber ​​Security

Cybersecurity shows us how quickly the importance of sourcing can change Just a few years ago, it was common practice in tenders to attach company safety guidelines to contracts and require service providers to adhere to these standards through a signature. Today, almost all major sourcing methods include security as an integral part of performance specifications. Regardless of the subject matter of the tender, the sourcing scope must be designed with an appropriate understanding of security.

Critical infrastructure is at the forefront of this development. The advance of IT-OT convergence mentioned above has led to a sharp increase in attack points. Attackers are developing more sophisticated methods and have increasingly powerful technologies at their disposal. Cyber ​​security, therefore, is no longer an internal matter. Elsewhere user organizations are not so dependent on collaboration with service providers. As a result, we are seeing an increase in the number of security providers – but this means that businesses face an increasingly crowded market of providers that differ considerably in terms of their portfolios and their respective know-how. Maintaining an overview in this highly dynamic market is no trivial task, even for professional market analysts. As we move towards 2023, we will see more companies call upon external consulting experts to guide their selection processes and arrive at a suitable selection.

Andreas Fahr is a partner at the global technology research and advisory firm ISG

Source link

Ruturaj Gaikwad knocks seven sixes in one over to win the Vijay Hazare Trophy. Singer Irene Cara, of “Fame” and “Flashdance,” passed away at age 63. Alia Bhatt, will act in Japanese films in the future?
%d bloggers like this: