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IT consulting business Alsbridge has set up shop in Australia to support companies outsourcing, moving to cloud and undergoing wholesale business transformation, in a region where the outsourcing market is immature.
Former KPMG directors and current senior directors for Alsbridge, Dom Bower and David Snell, led the Sydney operation to service clients in Australia and New Zealand.
Alsbridge plans to offer support to companies looking to outsource, implement robotic process automation and harness data analytics in the cloud.
Bower acknowledged that “this part of the world has been a little overlooked”. Cushioned from the full brunt of the global financial crisis by the local resources boom, Australian organisations did not face the same budgetary pressures as peers in other markets, which turned to third-party information services as a way to cut costs, said Bower.
This is changing as Australian companies tighten their belts. “The appetite for services has increased dramatically over the past few years,” said Bower, especially as companies started to operate on a more global footing.
He said the nature of outsourcing had morphed from its first incarnation. Instead of companies selling their IT infrastructure to a third-party technology company, and then effectively leasing it back by buying services over a period of time, Bower said organisations were looking to use multiple services from multiple providers.
Companies must fulfil more than SLAs
Telsyte analyst Rodney Gedda agreed. He said this also resonated for the technology companies which were no longer keen to take on all the risk of buying a customer’s technology and selling back a standard suite of services over a fixed period of time.
Gedda said what enterprises now sought was a mix of cloud, managed services, help desk and infrastructure as a service (IaaS) tailored to meet their needs. He said the growing maturity of managed service providers and their customers meant companies could select services from a range of providers that best suited their needs.
“No one’s selling their systems, signing a A$200m contract and hoping for the best,” said Gedda.
Woe betide the service provider that just fulfils the baseline service level agreements (SLAs), he warned. Enterprises want business partners that make strategic contributions throughout the span of the contract. “If the service provider signs for three years but only does the SLAs, there can be a bit of discontent,” he said.
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He noted that – perhaps as a result – IT companies are choosier about the outsourcing engagements they accept.
According to Gedda, “the word on the street is that large outsourcers are walking away from big deals” where the risk tends to fall onto the outsourcer.
Even so, some companies are prepared to dig deep for their major clients. Cris Nicolli, the newly retired CEO of IT services company UXC, which merged with global giant CSC in March 2016, acknowledged that was one of the drivers for the merger.
He said that, as UXC’s customers had grown and decided to outsource their processing and offload their infrastructure to a third party, UXC was challenged to have the financial wherewithal to buy that infrastructure and sell it back to the client as a managed service.
It had only been able to take on such deals infrequently but, with the deeper pockets of CSC, was better placed to support clients with outsourcing needs.
University course in offshoring
Australia boasts a large population of local datacentres, cloud service providers and managed service offerings. However, it still has to compete with international rivals and, while some Australian organisations like to keep their processing in country, many others are prepared to move it offshore.
Such is the demand that the University of Queensland Business School recently announced Australia’s first university-led course dedicated to offshoring.
According to the executive education director Richard Kennerley: “In 2015, Australian businesses saved an estimated $24.8bn through offshoring.” However, he acknowledged many organisations faced challenges when managing remote teams and cultural issues.
Aimee Engelmann, CEO of Brisbane-based outsourcing company Beepo, will present the one-day intensive offshoring course.
Engelmann said the province of large enterprises, outsourcing and offshoring was being embraced by small and medium-sized enterprises (SMEs).
“There is definitely interest in doing more with less. For some businesses, it is about saving costs. But for innovative high-growth businesses, outsourcing and offshoring allows them to take their business forward faster.
“They are not shrinking the business or the employee numbers. They are keeping staff in Australia, but increasing the business overall.”
While she acknowledged more “traditional businesses” often liked to keep their data processing in the country, she said: “That is not sustainable in a global economy.”
Instead, companies were starting to use a combination of local outsourcing and international offshoring – particularly for non-customer facing processing work or analytics – to make user of cheaper labour and resources.
However, technology sector analyst Gartner warned there will need to be a complete rethink with regard to offshoring in the future.
In a recent report, it predicted 40% of outsourced services will leverage smart machine – or robotic – technologies by 2018. Access to this pool of “virtual talent” means much of the grunt work that was once cheaper to perform offshore could be handled by machines – which don’t collect wages or get sick.
According to Gartner analyst Frances Karamouzis: “The new normal is hyper-automation arbitrage, which will be the avenue for a completely different cost structure through virtual labour. It also addresses scale and predictability.”
Dom Bower said Australia had been somewhat behind in its adoption of robotic process automation, but one of the major banks had made progress in the area.
He predicted there would be much greater demand in the future. This is because the approach allows organisations to grow and support processing spikes without the need to hire more people or add shifts to cope with the processing demand.
Robots can be located anywhere as long as they are connected to power and high-speed communications networks, he added.
Networks will enhance automation
The ability to automatically move processing loads worldwide will be greatly enhanced by a fast communications network designed specifically for the purpose, many of which now offer Australian connectivity.
Global Cloud Xchange, for example, will switch on its first ANZ node, intended to allow local companies to employ cloud arbitrage, in March 2016.
CEO Bill Barney said the network has been designed to allow companies to “arbitrage compute and storage around the world”.
He suggested this would help eliminate the need for many organisations to run any form of in-house computing operations, although that may still be several years distant for many organisations.