Commoditisedoutsourcingis no longer outsourcing and strategic
outsourcing is on life support.
These are the words of Robert Morgan, director at supplier
consultancy Hamilton Bailey and outsourcing guru.
"We are seeing the polarisation of outsourcing models," Morgan
told an audience of 160 senior executives at the offices of law
firm Berwin Leighton Paisner in London. "This is accelerating
beyond belief."
He says strategic outsourcing, where businesses invest in
suppliers to develop services which make the business more
effective, is dying and needs the business users to save it.
In contrast, commoditised outsourcing, which makes businesses
more efficient, is no longer really outsourcing because the
services have not been in-house for so long. "There is nothing to
outsource," he says. Commoditised outsourcing has turned into
managed services today.
Commoditised services such as desktop tools and applications,
for example, will be provided as software as a service in the
cloud. In effect, this will bring the services back in house.
But strategic services such as long-term change programmes do
have a future as an outsourced provision if business leaders can
save it from its imminent demise. "Strategic outsourcing is in
intensive care," says Morgan.
Suppliers and businesses need to bring new people in at the top
of their organisations to save strategic outsourcing. "We need
people to chop and change the model."
"Outsourcing has become accepted by middle management because
middle management is set up to manage outsourcing. But it has gone
off the radar of the board and it is not seen as strategic
anymore," adds Morgan.
HP's takeover of EDS is an example of strategic outsourcing
being killed off, he says. "HP is carrying out a frontal lobotomy
on EDS. All senior staff are going and with them the memory and the
ability to do good long term deals."
Innovations such as EDS's model of charging customers for
performance have disappeared, he says.
"Customers will have to push strategic outsourcing because it is
not where the suppliers are going."
Commoditised IT outsourcing services on the other hand have a
future but it will be difficult for incumbents to compete.
Suppliers will have to provide services in the cloud if they are to
survive. "Why do you think Microsoft, Google and Amazon are
investing in datacentres?"