{"id":1744,"date":"2010-02-06T12:58:00","date_gmt":"2010-02-06T12:58:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/the-industry-speaks-part-iv-cloud-services-will-separate-the-real-business-services-providers-from-the-body-shoppers\/"},"modified":"2010-02-06T12:58:00","modified_gmt":"2010-02-06T12:58:00","slug":"the-industry-speaks-part-iv-cloud-services-will-separate-the-real-business-services-providers-from-the-body-shoppers","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/the-industry-speaks-part-iv-cloud-services-will-separate-the-real-business-services-providers-from-the-body-shoppers\/","title":{"rendered":"The Industry Speaks, Part IV: Cloud services will separate the “real” business services providers from the body-shoppers"},"content":{"rendered":"

\"Gruyere\"For once I am stumped for a catchy\u00a0title, and am opting for some good ol’ jargon-laden\u00a0gruy\u00e8re\u00a0to tee-up\u00a0Part IV in\u00a0the\u00a0series discussing our New Normal in Outsourcing Delivery<\/a> <\/em>survey.\u00a0\u00a0At least\u00a0I’ve avoided the ‘T’ word lately, to grant\u00a0myself a\u00a0morsel of\u00a0poetic\u00a0license to indulge in a little\u00a0schmolz…<\/strong><\/span>\u00a0<\/p>\n

But we all love the term “Cloud” (c’mon, you know you do…).\u00a0 It gives us a nice fluffy visual of ripping out all\u00a0that complex, clunky computing chaos from our organization, and having some nice services\u00a0vendor deliver us everything we need for our business… leaving us with\u00a0simply a screen, a keyboard and lots off additional space in the office to\u00a0set up\u00a0that\u00a0Fussball table… or\u00a0a Twister mat in the corner…\u00a0<\/p>\n

Why Cloud Computing is the future of outsourcing delivery<\/span><\/strong>\u00a0<\/p>\n

While\u00a0I am probably the first cynic to\u00a0de-odorize the latest\u00a0cheese fumes\u00a0that infuse our industry, I have to admit I am rather taken with the whole philosophy of Cloud Computing.\u00a0 Cloud signifies the coming-together of business process and IT delivery in a fully outsourced model (see earlier post<\/a>).\u00a0 Cloud’s not simply about outsourcing the heavy-duty\u00a0computing grunt – it’s about the delivery of real business<\/em> services, enabled by the applications needed to support them, powered\u00a0by the requisite computing\u00a0and network infrastructure to host and deliver them.\u00a0<\/p>\n

\u00a0<\/p>\n

If Cloud was only about gutting the\u00a0clunky, expensive and environmentally-unfriendly\u00a0infrastructure, and\u00a0having Amazon and co. deliver the computing power, then it’s really just\u00a0an infrastructure utility <\/em>offering.\u00a0 However, if you’re going to have\u00a0your data and applications hosted externally in the Cloud, do you really need to manage them yourself anymore?\u00a0 It all depends whether you\u00a0need to customize the applications yourself because it gives you some sort of competitive advantage.\u00a0 For example, do you really gain a competitive edge with\u00a0the way you\u00a0run your benefits administration, or process your insurance claims, or isn’t it time to find a\u00a0services vendor\u00a0that will host the app, the associated infrastructure and even process the transactions for you?\u00a0\u00a0 If you feel your edge is customer service, or great internal employee care, then you can keep inhouse staff to take care of that, but what’s the point in managing all the related IT and back-office processing if someone can do it for you?\u00a0<\/p>\n

To refer back to the fundamental principle of outsourcing, if a third-party services\u00a0vendor\u00a0can perform a task for you at lower cost, and to an equal or higher standard, and the costs and risks of transitioning into the outsourced environment\u00a0are outweighed by the business benefits, then there’s little sense in doing it yourself.\u00a0\u00a0And if that vendor can add genuine consultative <\/em>value to improve that task and add to your overall business performance, then we’re talking about real business effectiveness<\/em>, and not simply a\u00a0cost-arbitrage scenario.\u00a0\u00a0<\/p>\n

Cloud’s value will only be reached when vendors and customers are honest with themselves<\/span><\/strong>\u00a0<\/p>\n

The challenge\u00a0posed to\u00a0the outsourcing\u00a0industry to\u00a0find new performance thresholds,\u00a0is shared equally by both customers and services vendors:\u00a0<\/p>\n

\n

1) Customers:<\/strong>\u00a0 do you know<\/em> how to take business performance to the next level, and are you having the right<\/em> conversations with the right<\/em> services vendors who have the process depth and delivery model to help you determine what that next level is?\u00a0 Do you have full confidence in the solutions being touted by the vendors with whom you are talking, or are you afraid you’re simply being heavily “sold”?\u00a0 Have you seen real evidence of their capabilities to deliver real business effectiveness?\u00a0<\/p>\n

2) Services vendors:<\/strong>\u00a0 have you determined where you’re truly distinctive in the market and can bring real business performance improvement to your clients beyond <\/em>simple cost-efficiencies?\u00a0 Or are you simply following the crowd and adding a thin veneer of industry jargon over your standard capabilities?\u00a0 And if you choose to ignore the hype and focus on standard service delivery, will you get squeezed out of the market in the future by smarter competitors with deeper process and delivery capability?\u00a0<\/p>\n<\/blockquote>\n

The question is how long<\/em> it takes for our\u00a0customers and our services vendors\u00a0to dig deep\u00a0and find honest answers to these questions.\u00a0 We knew back in 1995 that e-commerce was the future of retail, but it really took a decade for\u00a0it to become widely-adopted.\u00a0 Cloud will likely take 3-5 years to become fully-formed as a business utility offering, but we can be sure its seeds have been sewn and its\u00a0roots already taking shape, as our new study essentially reveals:\u00a0<\/p>\n

\u00a0<\/span><\/span><\/strong><\/div>\n
<\/span><\/span><\/div>\n

<\/p>\n

Figure 1: The roots of Cloud in an outsourced environment: Two-thirds of\u00a0 customers now evaluate ITO\/BPO solutions as bundled options<\/strong>\u00a0<\/p>\n

<\/a>\"\"<\/strong><\/a><\/span><\/span><\/span><\/span>\u00a0The roots of Cloud services can be found in today’s blended ITO\/BPO engagements<\/strong><\/span><\/span><\/span><\/span>\u00a0<\/p>\n

Just a couple of years’ ago, it would have been unthinkable that so many customers would be entertaining the concept of “hybrid” BPO\/ITO solutions, where they would seek to outsource business processes alongside the IT componentry that supports them.<\/span>\u00a0 Only a handful of customers had “bundled” both their BPO and supporting apps management\u00a0with a single provider.\u00a0 And these tended to be in cases where large customers had opted to “lift and shift” entire shared services operations over to their service provider and it was simply easier (and contractually more attractive) to lump everything over to one vendor to take care of everything.\u00a0 Today, as Figure 1 illustrates, close to two-thirds of customers are evaluating their outsourcing options looking at both both ITO and BPO in a more blended model and nearly one in five are doing it extensively (that’s a lot of engagements).<\/span><\/span>\u00a0<\/p>\n

In many engagements today, we are seeing both ITO and BPO feed off each other, where services vendors are getting much more proficient at cobbling together hybrid teams of systems architects and business process analysts to develop broader engagements that tackle end-to-end business process flows.\u00a0 Many of the more recent BPO engagements we are seeing have been extensions of existing ITO relationships, where the incumbent IT services vendor has brought in BPO teams to layer on business services.<\/span><\/span>\u00a0<\/p>\n

Being predominantly a BPO person myself, I am getting increasing calls from infrastructure guys trying to find out how “BPO fits in with their Cloud strategies”.\u00a0 Simply put, BPO provides that layer of flexible personalization to a Cloud\/SaaS offering that can make it workable for a business.\u00a0 I may be somewhat biased towards BPO offerings, but I am going to put a stake in the ground and declare that those service vendors which successfully develop Cloud offerings, that are supported by deep BPO expertise, are going to win out in the long-term.\u00a0 While today, these “bundled” offerings may not be\u00a0anything nearly as\u00a0sophisticated as fully-integrated Cloud solutions, pulling together the business process and supporting IT apps and infrastructure, within an outsourced model,\u00a0is the first step on road to achieving integrated Cloud services.<\/span><\/span>\u00a0<\/p>\n

\u00a0<\/span><\/span><\/div>\n
The bottom-line:\u00a0\u00a0Cloud will separate the real business services providers\u00a0 from the body-shoppers <\/span><\/strong><\/span><\/span><\/span><\/div>\n
As companies increasingly look to take advantage of standardized business processes, the fusion of IT delivery supported by business process services will accelerate.\u00a0 The ultimate challenge is for IT architects to understand how BPO delivery works, and business delivery analysts and operators to understand how to standardize their services on standard applications and infrastructure.\u00a0<\/span><\/span><\/div>\n

Moreover, services vendors need to decide whether to provide the data center and networking capability themselves, or manage it via partnerships.\u00a0 Customers care about where their confidential information is housed, and many will prefer it to be within the confines of a trusted service vendor.\u00a0 Don’t be surprised to see some partnerships and mergers between strong infrastructure services and BPO vendors in the coming months as the move to Cloud services picks up more steam.\u00a0<\/p>\n

To cut to the chase, Cloud Computing\u00a0presents the biggest opportunity for today’s services vendors\u00a0to deliver\u00a0blended IT\/BPO services, where they can\u00a0not only drive down costs\u00a0through labor arbitrage and\u00a0the removal of IT hardware with its associated\u00a0energy costs (that surmount to 60% of the costs of maintenance),\u00a0but also\u00a0to improve business performance through holistic, integrated business solutions.\u00a0\u00a0<\/span><\/span><\/span><\/span>The ability to demonstrate real<\/span> industry business process depth to compliment a robust Cloud infrastructure\u00a0is the only way to do it, and the time to develop that acumen is upon us.\u00a0 2010 will see\u00a0separate the men separated\u00a0from the boys in this market.\u00a0 Vendors pushing standard labor arbitrage services under a thin veneer of “Cloud marketing” will quickly get cast aside as the table-stakes<\/a> get a lot tougher.<\/span><\/span><\/span><\/span>\u00a0<\/p>\n

<\/span><\/span>\u00a0<\/p>\n

<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

For once I am stumped for a catchy\u00a0title, and am opting for some good ol’ jargon-laden\u00a0gruy\u00e8re\u00a0to tee-up\u00a0Part IV in\u00a0the\u00a0series discussing…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,51,849,81,838,91,832,837],"tags":[],"organization":[],"ppma_author":[19],"class_list":["post-1744","post","type-post","status-publish","format-standard","hentry","category-business-process-outsourcing-bpo","category-cloud-computing","category-hfs-industry-2010","category-it-outsourcing-it-services","category-kpo-analytics","category-saas","category-sourcing-best-practises","category-the-industry-speaks"],"yoast_head":"\nThe Industry Speaks, Part IV: Cloud services will separate the "real" business services providers from the body-shoppers - Horses for Sources | No Boundaries<\/title>\n<meta name=\"robots\" content=\"index, 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