New Trends of Offshore Outsourcing

October 26, 2016 6:44 pm | Updated 1 month ago.

It is D2E’ opinion that 2016 will be a year of disruption rather than transformation as far as offshore outsourcing is concerned. Analytics, automation, robotics and Internet of Things (IoT) will cause disruptions in offshore outsourcing business models both for vendors and the customers. The models that will be enablers for this change will be Hybrid Cloud and Bimodal IT as proposed by Gartner.

What specific changes do we foresee taking place in 2017?

  1. The rise of Specialty vendors and a sharp increase in multi-sourcing: It is D2E’ opinion that the outsourcing industry will go through a transition similar to the transition from mainframe computers to distributed systems. More and more customers will look for specialty vendors specializing in a specific domain or technology rather than looking for large players providing multiple solutions within a single company, the so-called one-stop This will lead to an outsourcing model where smaller deals are distributed across multiple providers, especially driven by increasing adoption of cloud and software-as-a-service.
  1. AI and automation reducing the size of offshore outsourcing deals, especially application maintenance: Automation, AI and Cloud Computing will substantially reduce the size of the outsourcing deals. Take, for example, Infrastructure support or for that matter any application maintenance and support engagement, which incidentally forms a significant part of outsourcing deals today. AI enabled by continuously improving machine learning powers can solve most of the L1/L2 issues that really account for the majority of the headcount in a maintenance support contract. The remaining small headcount requirement for L3 support, may really not justify a strategic outsourcing initiative.
  1. Business focus: With increasing adoption of IoT and embedded technology in most consumer goods, the decision-making process for acquisition of technology will gradually shift to Business functions rather than being concentrated around the IT department. Business Units will also have their own units deploying technology solutions in the cloud rather than waiting for the IT department to provision infrastructure. This will result not only in the size of the RFPs reducing as indicated earlier but also in the RFP process being gradually phased out as the current RFP process is truly not aligned to emerging technologies.
  1. Labor as a service: We are seeing more and more intelligent tools and virtual agents being deployed on the cloud to perform many routine functions, like consumer complaint resolution to finding the best insurance policy available in the market, that earlier required fairly time-consuming human involvement. It is D2E’ opinion that more and more such smart robots will be deployed on the cloud and we may see the emergence of the labour-as-a-service With increased adoption of Cloud across all domains, the term “Cloud” will be used in more generic terms and the outsourcing will be more specifically in the areas of Application-as-a-service (AaaS) or Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS) or Security-as-a-Service (SaaS) etc.
  1. Data-driven sourcing decisions: With the range of outsourcing options increasing rapidly, the customer decisions towards outsourcing will be highly data driven focusing on optimization opportunities and opportunities for integration across multiple cloud providers and service providers.