State of the Industry
From survey results to sentiments expressed by speakers and delegates, the outsourcing practice is being shaken up by new and emerging technologies, automation and robotics, geopolitical shifts, immigration reform, workplace demographic changes, and other outside influences. We are living in times of such fast-paced change that there’s great uncertainty.What does that mean for outsourcing, our
What does that mean for outsourcing, our jobs and our futures? Over the four days of the Summit, the industry’s thought leaders addressed these very pressing issues. What is clear, from the experts, is that outsourcing is not dying and that it remains as a strong global platform to grow and transform business. It is a powerful business model to advance innovation and collaboration that today is focused on measurable outcomes and not just tasks.
2017 MEMBER SURVEY
IAOP’s Chief Advisor Thought Leadership Jag Dalal, COP, and Todd Lavieri, President, Americas, ISG presented the results of the annual State of the Industry survey. The association has conducted the survey for nearly a decade and this is the third year it was done in partnership with ISG. Both IAOP members and ISG customers participated.
“Disruption is creating uncertainty,” Dalal said. “We found a lot of the surveys were incomplete because of the anxiety people are feeling.”
The State of the Industry survey found that the digital revolution fueled the 2016 sourcing market. Full year annual contract values had modest increases, reaching $37.4 billion, up 9 percent from the prior year. Noting that the value of outsourcing contracts was down in the last quarter of 2016, Lavieri predicted it will be another year of transition.
TECHNOLOGY CREATES DISORDER
In the live audience polling during the keynote session, customers, providers and advisors all agreed that technology-driven disruptions were having the most significant impact on their industries with 40 percent of the respondents in each group selecting it as its #1 choice. Other top disrupters were: customer-centric or market-demand driven disruption (35 percent of customers), business models with aggressive commercial or pricing strategy disruption (21 percent of providers) and public policy-driven disruption (17 percent of advisors).
“Customers are creating disruption, business and IT Leaders are influencing the push for advanced technology. They are impatient and want to move ahead faster. Speed is an important factor for enterprise clients.”
– Todd Lavieri, President, Americas, ISG
STRENGTH OF AS-A-SERVICE
As-a-service solutions are now the buyers’ choice, the survey found. These models now represent nearly 40 percent of global annual contracts and the market continues to migrate from traditional sourcing to As-a-Service.
Infrastructure-as-a-Service (IaaS) is outpacing Software-as-a-Service (SaaS) as the strongest growth area. In last year’s contracts, IaaS was up almost 54 percent over the prior year while SaaS contracts rose by 15 percent over 2015.
Traditional sourcing is uneven in the midst of a structural change with increasing activity moving to the cloud. But certain industries continue to drive the demand. In the American market, banking, financial services and insurance industry are leading this trend while in EMEA the growth areas are telecom and media. Manufacturing is accelerating outsourcing in the Asia-Pacific region, according to the survey.
NEW BUSINESS MODELS AND ENABLING TECHNOLOGIES
The survey results found that 78 percent of clients consider the use of new business models a key to their business success. These preferred models include the subscription model (78 percent), the omnichannel model (50 percent) and the marketplace model (44 percent).
But the technologies to enable these new business models – automation, cloud, analytics, mobile and social – are very difficult or complex for providers to implement, according to 66 percent of the providers who responded.
The live audience polling also reflected this discord. Of the providers responding, 59 percent said they are preparing and building competencies that enable new business models. But both customers and advisors saw it differently with 48 percent of customers and 46 percent of advisors saying that providers are behind where we want them to be.
When asked whether they believed that the current global political environment would impact their sourcing strategy, 66 percent of OWS 17 delegates at the keynote session said yes; 32 percent of providers have made some strategy changes to account for these challenges.
GLOBAL POLITICAL IMPACT
The U.S. election, Brexit vote as well as other populist elections around the world, including France, Greece, Argentina, Brazil and the Middle East will further impact sourcing, the speakers said.When asked whether they believed that the current global political environment would impact their sourcing strategy, 66 percent of OWS 17 delegates at the keynote session said yes and 34 responded no or not sure.
When asked whether they believed that the current global political environment would impact their sourcing strategy, 66 percent of OWS 17 delegates at the keynote session said yes and 34 responded no or not sure.
In the U.S., this can lead providers and clients to focus more on automation and outsource offshore less. This also can result in more onshoring work, customers bringing jobs back in-house and delays in outsourcing decision-making, the State of the Industry survey found.
So far, the Brexit has not impacted customer strategies in Europe and the U.K., according to results from surveys at the European Outsourcing Summit. Meanwhile, 32 percent of providers have made some strategy changes to account for these challenges.
by Sandy Frinton, Editor-in-chief, PULSE