On Demand IT – The future of outsourcing

Samir Dhir
President, Banking and Financial Services
Article

I believe a sea of opportunities and threats await the IT industry in the next 5-6 years. We are at a pivotal moment, a tipping point, if you will, as a new set of emerging delivery models become mainstream. With services such as web platforms and SaaS (software as a service) becoming readily available, we already see a change in client requirements as they increasingly pick these newer options.

Globally, ‘On-Demand economy’ is drastically transforming commercial behavior. ‘On-Demand economy’ is defined as that economic activity created by technology companies that fulfills consumer demand via immediate provisioning of goods and services.

Transformation of IT marketspace

Alternative delivery models are expected to radically transform IT marketspace. Industry pundits are not wrong when they say that the very fundamentals of IT industry are going to change; services and solutions which have been IT cash cows so far are getting transformed. Some of these will take a new avatar in the rapidly changing technology landscape while others will forever disappear. These changes have led to mushrooming of alternative delivery models which can be classified broadly as:

a) Business-driven b) Technology-driven c) Process/Time-to-Market driven and d) Non-linear models.

Analysts predict that most of this change will be concentrated in the next five years in all industry aspects be it clients, investors, IT professionals, or end-consumers. It is also expected to separate the wheat from the chaff and companies invested in innovation/differentiated offerings will tread a higher growth path. While most IT organizations are constantly struggling to demonstrate cost savings, some are focusing on ways to add value to the business.

Outcome based models

In business-driven service models, there is a need to align IT with business in order to directly impact performance. To succeed in such a scenario, as an IT services partner, we have to rapidly move from traditional input based models measured by SLA adherence to outcome based models measured by performance in specific business metrics. It means being able to take a top down view of customer’s business, understand what metrics are used to measure process effectiveness, and what IT can do to enable it. Outcome based models are also being used to drive financial gain sharing with IT partners. This gain sharing is based on our ability to meet and improve business metrics and achieve desired outcomes.

Cloud leveraged environment

On the other hand, if we consider the technology impact on service delivery, alternative models, needed to meet the new gamut of services, are coming into play. In this cloud leveraged environment, customers are looking for scalable, flexible, and pay-per-use service delivery. The delivery model has to be based on shared services with the flexibility and agility to deliver in the cloud paradigm. We need to closely track customer demand to be able to provide pay-per-use services along with the necessary orchestration platform and tools.

One such option is SaaS delivery which refers to a method of providing hosted software applications to clients in a cloud computing environment. SaaS delivery is the backbone of an emerging software model that eliminates the need for client organizations to incur the expense of purchasing or maintaining expensive application servers and software.

Agile-based delivery is big

There has also been process innovation in service delivery to enable faster turnaround times in projects along with tighter integration with customer requirements. Agile-based delivery is a big shift from traditional waterfall models enabling rapid prototyping and development for greater project success. It ensures that things don’t fall between cracks when the project moves from design to build. Similarly, DevOps is becoming an increasingly popular service model that ensures development and deployment happen in tandem leading to faster and effective go live.

Finally, IT services industry has been working on evolving non-linear models of service delivery which offer scalibility at reduced costs.

Businesses in this transformed economy are nothing but a manifestation of years of technological innovation and rapidly evolving consumer behavioral patterns. These models have thrown open the doors to real-time fulfillment of goods and services that has not only been utilized by consumers in an astounding way but also kept the economic momentum going.

On-demand economy

‘On-Demand Economy’ is already revolutionizing the way people conduct business, influence governments, and create large-scale employment. Presently, the impact is being felt by tech-savvy urban users, however, the adoption of these services by non-urban consumers still remain a big question. When that happens, ‘On-Demand Economy’ will bring in a tectonic shift, similar to what happened in the 1990’s when internet made a splash.

In my opinion, all these delivery models will continue to co-exist and we’ll have to pick and choose the ones that fit best with client objectives. It’ll not be a one-size-fits-all scenario as customers become increasingly discerning and the industry matures. In some cases, we might have to use more than one model for different aspects of the client’s requirements – outcome based model to demonstrate value to customer (which could be the financial arrangement) along with agile development for faster and effective delivery.

I believe, within the next couple of years, all these models will no longer remain alternatives but rather become mainstream.

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