10 outsourcing trends to watch in 2016

Experts expect a number of shifts in the IT outsourcing industry in 2016. Some of these shifts include a focus on hyper-speed deal making, new multi-sourcing headaches, more man-machine collaboration and more.

Stephanie Overby Jan 18th 2016 A-A+

5. Integration challenges surge

“Customers adopting an ever larger number of emerging digital technologies will face an ever-larger integration challenge,” says Rebecca Eisner, partner in the Chicago office of law firm Mayer Brown. “Many of the most powerful cloud technologies will require integration efforts comparable to those required to install ERP systems.” Because most companies do not have employees capable of managing multiple emerging technology platforms, they’ll have to outsource service integration, incident management, and change management. Expect increasing partnerships among providers, predicts Mayer Brown partner Brad Peterson.

6. The service providers universe expands

“Customers will buy from an expanding list of technology providers,” says Dan Masur, partner in Mayer Brown’s Washington, D.C. office. “Customers will continue to turn to ITO, BPO and cloud service providers who have blazed a digital trail for help in becoming digital businesses. They will source services from an ever-expanding list of emerging and digital technology providers.  Pace Harmon’s Singh says we’ll see more product-driven managed services “as more product-oriented vendors, such as Cisco and others, move beyond just selling their products to also delivering services around their products. We are already seeing this on a small scale, but expect it to ramp up in 2016 as very large clients are growing their managed services capabilities.”

7. Multi-speed IT hits outsourcing

Gartner dubbed it “bimodal IT.” McKinsey named it “two-speed.” Whatever you want to call it, outsourcing clients will recognize the need to take different approaches to managing the “run the business” part of IT and the “change the business” part this year. “Clients will use the bi-modal approach to implement commercial and contractual mechanisms with vendors to clearly delineate the roles of the respective groups and to optimize the contributions of each to the business,” says Eleanor Winn, managing director at Alsbridge.

8. Vendors get soft(er)

“After 20 years, vendors who have been accustomed to bending customers to their one-sided terms by offering low prices will come to realize that further market penetration—particularly penetration into core functions or large companies--will require a more accommodative approach to meeting the needs of those companies,” says Peterson.

9. Automation will redefine relationships

“Having exhausted the opportunities to move work to lower-cost people, ITO and BPO companies are now focused on moving it to machines,” says Roy. “Buyers with contracts designed to purchase people will need to reconcile their contracts to this new world.” Both customers and providers will have to rethink their deals as they integrate more robotic process automation (RPA) into IT service delivery.

“Clients will rethink their sourcing strategies and how to build their RPA capabilities and providers will continue to build automation into their solutions,” says Craig Nelson, managing director with Alsbridge. “Both parties will have to redefine roles and skills requirements for human jobs, as well as manage the touch points between automation functions and jobs performed by humans. This will present a significant challenge for outsourcing relationships as agreements will need to be flexible to accommodate these highly dynamic environments.”

10. Agile sourcing emerges

With technology itself seeming to advance on a dime, outsourcing decision making will have to speed up. “Companies who decide on a digital strategy will execute quickly in 2016 to avoid seeing a technology shift or a competitor jumping ahead,” predicts Peterson of Mayer Brown. “We see increasing numbers of clients deploying substantial negotiating teams working on an agile basis to close smart deals fast.”