Updated December 2018
Outsourcing integration challenges have increased, production workloads, applications, and enterprise systems are moving to the cloud, and security is a top concern for everyone, no matter your industry.
Nothing is certain, however, industry watchers expect a number of shifts in IT as it relates to overall business objectives and strategies.
We also expect to see maturation in cloud computing, robotic process automation (RPA), and cognitive capabilities while entities like the call center and business models based solely on labor arbitrage fade into history.
1. Industry insecurity reigns
“It will be one of a handful of times that outsourcing will be affected by the political climate, says Rebecca Eisner, a partner in Mayer Brown’s Technology Transactions practice. The new U.S. administration has already had an impact on trade agreements, regulations, tax policies, visas, and immigration–which big or small have had an impact on the outsourcing industry, which continues to rely on the benefits of global labor arbitrage. And Brexit only adds to industry anxiety in the U.K. and Europe.
Companies have begun assessing and auditing their contracts to determine the impact, says Christopher A Seidl, partner and chair of the global business and technology sourcing group at Robins Kaplan. “This will lead to deeper discussions between parties, and more renegotiations, over terms relating to currency, changes in the law, and the overall costs of the deal,” Seidl predicts. “They will also seek to add flexibility into their outsourcing arrangements through, for example, new termination rights, rights to move locations, rights to insource, and other similar protections,” Eisner says.
2. Security stays top of mind
Information and data security will continue to be a major concern for the foreseeable future. “Traction for advanced security automation, threat intelligence, and security analytics solutions will continue to be robust as enterprises look to build a holistic approach to enterprise security and fend off business risks,” says Jimit Arora, a partner in the Everest Group’s IT services division. “As-a-service models to scale security capabilities and dynamically support cloud-based workloads will also gather steam.”
Vendors will take more of a lead role in protecting the enterprise through security offerings, adds Seidl. “Vendors won’t simply be thought of as an entry point for hackers, but rather as an ally for regulators, politicians, and businesses who continue to be challenged in looking for solutions.”
We are already seeing many Managed Services and IT Providers become Managed Security Service Providers which can be attributed to the importance of security in today’s business environment.
3. Intelligent automation drives down costs
“Intelligent automation and robotic process automation will take a step function forward for certain providers, disrupting existing commercial outsourcing structures and driving down costs and, to a lesser degree, prices in the market,” predicts David Rutchik, executive managing director with outsourcing consultancy Pace Harmon. “This will result in supplier margin expansion, greater savings opportunities for enterprise buyers, the need for enterprises to renegotiate existing outsourcing deals, and the bifurcation of the ‘haves’ and ‘have-nots’ in the marketplace.”
4. Customers demand more from the cloud
The cloud is no longer new and adoption continues to increase. “Clients will force cloud providers to mature,” says Adam Strichman, founder of boutique outsourcing consultancy Sanda Partners. “Clients will become savvier about what a cloud service really means, and these ‘me too’ cloud services are going to have to grow up or be kicked to the curb.” Customers will be looking to leverage the cloud as the core platform for new internal and external initiatives, adds Arora. “Enterprises will demand significantly more value from cloud service providers to drive transformation in their business.”
With technology always evolving and businesses constantly innovating, it will be interesting to see what’s next in the world of outsourced IT.
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