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Is the Future Bright for Outsourcing? (part 1 of 3)

by Derek Parlour, Director, DJA Business Solutions

Now I want to move into the possible future trends in outsourcing and here it does become opinion. Again I will use my recent experience at National Rail Enquiries, particularly in IT outsourcing but including other areas; however, it is all part of the build-up of information and experience over the years.

National Rail Enquiries is driven very much by the technology its users want to use. Twelve years ago it was all about person-to-person call centres, then it was the web, now it is moving to mobile channels. The National Rail Enquiries desktop website usage has been growing by 25–30 per cent for years, but in 2012–13 it grew by 2 per cent, and they expect 2013–14 to see a fall.  Overall volumes are still rising sharply but they are more in the mobile internet and mobile app areas, where the number of contacts on mobile apps reached the same level as for the desktop site within 18 months of the apps first being released.

This change for them has two very different aspects from the move from call centre to desktop internet.

Firstly the mobile channel isn’t homogenous. For a website you need to be compatible with different browsers and different operating systems but desktop internet is pretty standard. Mobile isn’t like that – with different operating systems and devices, mobile internet, Apple iOS, Google Android, Blackberry, Windows, phone, smartphone, tablet, tablet mini etc., not only do you need a large number of versions to meet all the market, you also have old versions being dropped and new ones coming in with alarming rapidity.

The second difference revolves partly around the speed of change in systems but also in the increasing rise of customer expectations. With mobile, things are expected to be quick and your development cycle needs to reflect this.

So this means from the customer side you have a trend of a widening variety and an increasing speed of change.

Customer needs drive our business strategy and so our outsourcing strategy.

From the supplier side there is also an impact of technology. Yes there is a widening variety of platforms for user services but the systems are relatively well known and easy to work on. The Apple operating system iOS is used by many small developers, as is Android and the other smartphone operating systems. This means that the small app developers can now compete with the big multi-billion pound system integrators in delivering systems and software for relatively large clients.

Coupled with this is the increasing use of open-source software. The competitive edge that proprietary software gave to the big suppliers is being eroded.

In addition you have changes in hosting impacting on how you approach outsourcing. For example in order to build a website for a company that receives a large number of visits you used to have to go to a big supplier for hosting and software together. Now it is easier to split the services as it is simple to sign up with Amazon, Azure, Salesforce, etc. and get access to huge capacity and performance on a “pay as you go” basis. You can then go to a small boutique web designer to design your website but still get access to industrial-sized hosting capacity.
Cloud is still relatively new and complex, but knowledge of it is increasing and there is support out there to help you make the transition.

In the past few years there has been a trend towards multi-sourcing, partly driven by the factors above. This is especially so in the public sector where there is a drive to introduce more work for SMEs and less for the oligopoly of large suppliers that currently exist. In an earlier chapter I covered the significant amount of public sector work run by the likes of Atos, Serco, G4S etc. I see the trend to multi-sourcing continuing and this presents challenges for suppliers and clients.

Suppliers will see average deal sizes fall. This isn’t a bad thing overall as multi-sourcing does expand the supplier market. However they will have to adapt to be able to compete with smaller outsourcing suppliers in areas that have traditionally been the domain of the larger organisations. Larger suppliers will need to be able to provide the small, discrete services within
their traditional organisation. We have already seen that with some of the suppliers at National Rail Enquiries.  Multi-billion pound system integrators developing consumer apps alongside their traditional business of multimillion pound one-stop-shop systems delivery.

This trend also creates a challenge for the client - clients need to be geared up to govern these smaller contracts to get the full benefit. That involves rethinking your skillset and looking at what you need to do to manage the future.

Read part 2 of ‘Is the Future Bright for Outsourcing?’

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Derek Parlour’s book, Successful Outsourcing and Multi-Sourcing, is available to purchase here. Members of the National Outsourcing Association are currently eligible for a significant discount - just use the code G14IZN30 on the Gower Publishing website.


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