The Outsourcing Industry's Need for Renewed Relevance

I spent today at the Horses for Sources (@horses4sources) Blueprint 3.0 event.  Thanks to Phil Fersht (@philfersht) for the gracious invitation.  This was my return to an outsourcing-oriented industry forum and I enjoyed seeing so many old friends.

The experience motivates me to re-start my blog postings on the trends and dynamics of the outsourcing and shared services industry.  So, here we go.

My thoughts are numerous ... and pivot around a central theme of how the service providers in the global outsourcing industry seem to be stuck in an antiquated view of their relevance to their Clients.

I sat on a panel session comprising leading Advisors and my parting comment was about the fact that most larger companies (buyers of outsourcing) appear to have abandoned hope for innovation through these relationships and are moving towards a strategy of self-determination.

From my own dialogues with many Clients, I sense an accelerating strategy for platform-based services integration strategies.  These strategies allocate service responsibility to those service partners which are world-class in their particular function.

Some might call this "multi-sourcing," but I think it's an entirely new paradigm for the industry.  I am wondering how many of the "traditional" service providers have internalized this. 

Former models of staff augmentation, governance, contracting processes, benchmarking, service level management, and the like ... these are all shifting.  (Go ahead, try to apply traditional outsourcing contracting processes and terms to Amazon Web Services.)

I cited the fact that SAP, Oracle, salesforce.com, and VMware, among many others, are positioning themselves as the integrators of services.

This calls to question the strategy of the traditionalists ... are they intending to offer their own platforms as an alternative to the ERP narcotic that has cascaded across so many companies?  Or, are they advocates of PaaS integration strategies that place the burden of integration and interoperability on the backs of the Client?

For many of the well-established service providers, I think there's an awakening happening - or should be happening.  The definition of relevance is changing dramatically.  Clients aren't looking for "partnerships" as much as they are wanting best-in-class functions knitted together through nimble integration technologies.

The implications to the service provider community are extensive.  Further, the implications to Clients is even more extensive - to the CIO, Shared Services, and Supply Chain leaders. 

I have much more to say on this, and will post over time.  The pages in the outsourcing industry are turning, and the move towards Client-driven enterprise services integration (including "spot buying") are moving the cheese of many companies on the buy and sell side of the "as a service" ecosystem.

Peter