As the concept of outsourcing non-core business functions matures in the South African market, companies are seeking more flexibility and a higher level of value from their service providers.
According to Victor Antezana, general manager: sales at Business Connexion, this is effectively ushering in the second generation of outsourcing, which is characterised by utility models for hardware, software and services.
"Companies that have been dealing with a managed services provider over the last five or six years are comfortable with the value and reliability of outsourcing. They are now looking to extend the benefits further up the value chain to managed services that include software as a service, hosted infrastructure and applications," Antezana explains.
He says the cautious approach of some years ago was driven out of a natural scepticism for an emergent business model. "With the successful achievement of the basics, as well as the proven ability of managed services providers to take over staff, many of the perceived risks regarding people, assets and data have been assuaged. Satisfied with outsourcing, businesses are now asking for utility models and on-demand service availability."
Notably, Antezana says clients are no longer concerned with how their services are delivered. Their concern is rather focused on availability and the ability for the service provider to deliver according to fluctuating business needs.
"In the pay-per-usage and on demand world, clients want more than a fixed-charge service level agreement. The service-based fee is calculated differently. Instead of buying support for a desktop or MIPS [processing power], clients want to pay per e-mail or per use of an application. How that application is managed, how it is delivered and how it is hosted is not important to clients as long as they are sure it is secure and reliable. All of this becomes the responsibility of the service provider," he explains.
The ability to deliver second-generation outsourcing requires considerable investments from the service provider. "In this environment, the landscape of competition has changed dramatically. It is a global market and services can, theoretically, be delivered from anywhere on the planet," says Antezana.
Furthermore, the on-demand concept dictates that if a client has a spike in usage, the service provider has to have capacity available to meet the demand. "This puts considerable pressure on the service provider. If it is unable to meet fluctuating demand, the business model is compromised," he notes.
Successful service providers in the second generation outsourcing market will be those that have the pedigree and proven ability to deliver reliable managed services to market. "Investments in capacity, the scale to meet market requirements and the expertise to rapidly implement emerging trends to the benefit of clients are critical factors in this competitive market," says Antezana. "Technology is becoming a consumer-oriented service and, as such, users want the availability, reliability and low cost that they associate with any other commodity."
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