It’s a period of transition for UK organisations as outsourcing meets Cloud services and CIOs have to decide the best delivery mechanism to consume IT services.
According to a major new study from research firm K2 Advisory, in 56% of organisations CIOs are either not looking to outsourcers for transformational end user services, or are planning to focus on cost reductions rather than major technology changes. However, the remainder (44%) are considering more innovative approaches that aim to improve end user satisfaction and productivity.
Within the 40% of organisations who “have no interest in outsourcing this area” will be many organisations who still plan to make these types of workplace improvements, using the in-house IT team. K2 foresees a particular drive to improve the end user experience in many UK organisations from now and through 2012 with the Cloud as part of the solution.
Kate Hanaghan, K2 Advisory Research, states:
Nonetheless K2s findings support a conclusion that a shift to Cloud from traditionally outsourced client-server desktop services is likely to play a crucial role in transforming end user services for many organisations. Consumer services (such as gmail) have enabled users to become familiarised with the use of Cloud-delivered desktop services, thus creating a receptive culture in the workplace thanks to the increased flexibility Cloud desktop services can bring organisations.
None of this spells the end of the IT department. Some 31% of CIOS plan to keep integration challenges in-house by developing the skills needed within the in-house IT department, while 23% are turning to external providers, although 43% of the market do not expect to address integration issues for another 1-2 years.
CIOs are keen on Business Process Platform delivered via the Cloud, with the the key attraction being the level of flexibility offered. Traditional outsourcing often comes in the form of lengthy contract terms, which can make it difficult to bring innovation into both the contractual agreements and the delivery of services.
Just under a third (32%) of organisations say such a platform could help deliver cost-effective solutions in non- differentiating areas of the business. While another 32% would consider joining an industry-specific platform. HR, Payroll and Finance and then Procurement are most popular areas for this type of service delivery. The preference is clearly for broad horizontal business services, rather than sector-specific capabilities.
All of this will mean that CIOs will naturally become more focused on business outcomes, rather than the IT systems per se and in turn this will lead to a preference for outcome-based contracts. K2 argues that forward-thinking CIOs will focus on what they can do to help the organisation achieve its goals, not the IT kit behind the outcomes.
But the advisory firm warns that while the theory is good, several key ‘roadblocks’ exist that will preclude large- scale take-up of these types of contracts in the short-term. For a start, 19% of CIOs believe that in their role they are not in a position to negotiate this type of contract while 12% believe these types of contracts to be difficult to manage internally.
Looking further afield, while attention today is focused on SaaS, IaaS and PaaS, there will come a point when organisations explore the Cloud ecosystem concept, whereby a set of organisations that share and/or exchange Cloud services to serve a common goal such as: reducing costs, accessing best practice, or fast-tracking technology solutions for business development. K2 identifies a key benefit of ecosystems as an improved cost-to-value ratio to leverage more value from technology investments. Within the current landscape of capex investments and traditional outsourcing, this is not possible.
But that could be some years out. Today, some 68% of organisations either do not have a clear understanding of how a supplier ecosystem will benefit them. This may be because their outsourcing provider hasn’t actually raised this with them. K2 advises that outsourcers need to improve the way they bring their partners into the frame and/or the way they articulate the benefits this can bring to buyers.
K2’s report - "Sourcing IT services 'for the journey': The impact of Cloud on Outsourcing" – Market Trends - is available free of charge to members of the K2 Advisory CIO Research Forum. Membership of the Forum is by invitation or recommendation in order to ensure the quality of input, debate and networking opportunities. Further information here.
