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Outsourcing trends to watch in 2017

Stephanie Overby | Jan. 3, 2017
Here are 10 predictions for the year ahead in IT outsourcing.

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 cloud

The novelty of cloud computing adoption has worn off, and the grace period for providers is over. “Clients will force cloud providers to mature,” says Adam Strichman, founder of boutique outsourcing consultancy Sanda Partners. “Clients will become more savvy 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 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.”

5. Offshore providers pivot

“The days of unprecedented growth for the tier one offshore firms appear to be over,” says Chip Wagner, president and partner with Information Services Group (ISG) Business and Emerging Service. In addition to the potential impact of Brexit and a new U.S. administration as well as increasing automation, offshore providers are also dealing with currency exchange issues. All of that has lead to increased margin pressures and staff downsizing, says Wagner. “Clients will seek differentiation of solutions driven by automation and new technologies, as well as better governance to manage increasingly multiple smaller deals.”

Indian providers will significantly increase their functional capabilities in key process areas and build better organizational change management capabilities, says Rutchik. “This will enable them to compete more effectively with the IBMs and Accentures for more transformative and strategic work.” Look for acquisitions and hiring from U.S. and European consultancies.

6. RPA gets smart

Look for RPA tools to include increasing levels of intelligence. “Adding cognitive features to RPA has been going on in different ways. At its simplest form, there is some degree of context awareness when robots are running. In the more advanced form, there is computer vision and natural language processing,” says Sarah Burnett, vice president of research with Everest Group. “More is to come as RPA vendors either build or partner for AI.”

RPA vendors will get smarter as well, turning their software applications into platforms that enable the seamless addition of new features. “The successful ones will be able to combine their base platform with third-party technology to increase the depth and breadth of their software to satisfy a diverse set of client requirements,” Burnett says.

 

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