What’s Next in Outsourcing: Most important trends in 2014

2014-27-02, by Diana

What's next in Outsourcing: Predictions from OWS 2014 With the new year already in the middle of its first quarter, the question of “what’s next” in the outsourcing industry is hotly debated. The 2014 Outsourcing World Summit that took place last week, organized by the International Association of Outsourcing Professionals (IAOP), shed some light on the matter. Here’s a list of lessons we learned from the conference, with some other items we added to fully answer “what’s next” for technology outsourcing in 2014.

1. Cloud
Cloud technologies are only going to get bigger. The move to cloud is driven by data analytics and will grow as executives figure out exactly what they need. Executives will have to learn what data to move to the cloud, how to do it, and how to do it securely. IT departments will be further split into providing functionality on one hand, and innovation on the other (more on that here). In the future, there might also be more governance and new legislation concerning cloud technologies as they become a mainstream norm. For software development (and frankly anyone within the technology industry) expanding and working with cloud technologies will become crucial in the coming years.

2. SMAC and Big Data
The way businesses make decisions will soon change with the increasing number of different technology platforms used by customers and potential of collecting large amounts of data from these platforms to drive better business decisions. SMAC stands for Social, Mobile, Analytics, and Computing, and they are at the heart of Big Data. Data collected from SMAC can provide insights into your customers, competitors, and costs. It can also improve governance. Executives will need to figure out what kinds of data to collect, what their data is telling them, how to use it, but also how to protect their hard-won data. Along with the rise of benefits of using and collecting data, there will also be considerable consent, privacy and other legal issues to be considered.

3. Omni-Channel Systems and Customer Centric Experience
The goal of working with SMAC and using Big Data effectively is ultimately to enhance customer experience. The idea behind omni-channel systems is essentially to take your business wherever your customers are, by providing a service that is integrated across many different platforms. Customers themselves expect a great deal of functionality and integration, and businesses need to start thinking about how to improve their technologies with regards to customer experience. The retail industry is spearheading the omni-channel transformation, with companies like Nordstrom coming out on top, but there is a lot of opportunity for innovation and improved efficiency for any company that finds a way to integrate various technology platforms and their user experience. Companies whose core business does not involve IT and systems integration will be forced to innovate and will greatly benefit by outsourcing such projects to specialized software providers.

4. Outsourcing for Talent
The issue of talent shortage is not new, but the question of skills availability and high turnover rates remains vital. To deal with the shortage of needed skills, many companies will turn to internal training, or set up strategic partnerships with insourcing or outsourcing providers. Yet other companies set up captive centers, onshore or offshore, in places where needed talent is available. (Here’s a quick overview of which strategies work best and when.) The discussion of constant talent shortage is now also turning into a more self-aware understanding of how the industry treats talent and how the situation can be improved. Articles like “Is Talent a Severe Crunch” question how current views of talent and fluidity of skills influence the shortage of talent. Maybe once we engage the entire ecosystem of outsourcing we will be able to find the right people whenever we need to. For now, there are plenty of global outsourcing locations that have the skills to match almost any project need.

5. Outsourcing for Innovation
Outsourcing used to be all about cutting costs, but there is a new shift in understanding the real value outsourcing can bring to an organization. Outsourcing can now be used for innovation, or in other words, to gain additional revenue. If used strategically outsourcing can become a leverage that can help use new resources for new projects and help drive growth. CIOs are now realizing that money saved by outsourcing can be reinvested to enable growth and impact revenue – which is good news given that IT is increasingly expected to provide innovation and functionality. Outsourcing helps with two key things: (1) reallocation of capital and (2) access to new markets, both of which help free up budget and invest it where it can have higher returns. This view of outsourcing suggests that outsourcing will become a strategic executive decision with a potential for bringing bigger growth and innovation.

Trust in Outsourcing Partnerships6. Partnerships based on Trust and Transparency 
Outsourcing is increasingly considered to be a strategic decision and not just a cost-cutting solution. To use outsourcing most effectively, outsourcing professionals are increasingly looking for trusted partnerships and reliable and transparent outsourcing providers who will understand and help achieve their goals. In response, outsourcing providers are shifting from traditional outsourcing models and are offering more integrated approaches that allow buyers to retain more control and improve their processes. Here’s more info on different types of outsourcing models and how they evolved to meet the needs of the industry. In 2014, the need for reliable and transparent partners will increase, as outsourcing promises to bring more innovation, revenue, improved technologies and better processes to companies everywhere.

What other trends do you see in 2014?

If you were there, what did you take away from OWS 2014?

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