As the concept of outsourcing critical yet non-core business activities increasingly gains hold in mature markets, the necessity for the service provider to be located in close proximity to the client is falling away.
That`s according to Mike Sewell, Group Executive: Outsourcing at Business Connexion. "Managed services as a more effective method of handling specialised, non-core business functions such as technology, offers a proven value proposition. This is due to several realities, including the fact that economies of scale can be leveraged and specialists can more effectively provide complex services," he says.
"Within this paradigm, and as technology delivery increasingly becomes independent of location - often delivered as a service or utility over the Internet - astute companies are realising that the geographical location of their outsource service provider is, to some extent, immaterial," Sewell explains.
He says this effect goes well beyond our own borders: "It`s an outcome of globalisation. In this environment, companies can look at sourcing their technology partners anywhere in the world, so long as the service provider meets the necessary criteria of delivery, service excellence and effective communication, all at acceptable levels of risk. After considering risk factors such as language, cultural fit, political stability, data and IP security, the decision to secure services offshore is not an easy one," continues Sewell.
While this move has started, there is no rush. However, it is a reality that Sewell anticipates will gather momentum. "As clients become aware that some services can be procured worldwide, there will be pressure on local service providers to ensure their offerings are able to compete on an international platform - in terms of pricing, service delivery and to recognised standards of governance and technology management. The cost of global offerings is more likely to be used as an element of negotiation rather than a genuine desire to move offshore. Not many clients have an appetite yet for the risks of offshore services acquisition," he says.
As such, competent South African service providers have a window of opportunity to deliver the required support. However, they must remain internationally competitive through the use of best practices as well as appropriate pricing models.
As utility computing models begin to move out of the development laboratories and into the field, outsourcers are able to offer their services on pay-per-use models, such as the application service provision model. "The ability to provide utility computing is not limited to applications, though," says Sewell, noting that processing power, storage capacity and other resources can be delivered to businesses as required.
Concordant with the move to utility computing is the increased tendency for more services to be similar in the technology field. "This, too, works in favour of both the client and the service provider. With more services being the same, economies of scale apply more effectively - the service can be provided at a lower cost and still deliver a profit to sustain the service provider`s business," he says.
While such models are starting to gain traction, there remains somewhat `archaic` thinking within much of the corporate world, as buyers often remain attached to specific technologies. "Those who have a comfort zone in technology tend to insist that the service provided is based on a certain vendor or product. The reality is that this is often immaterial, as long as the service is appropriately reliable and effective both functionally and cost-wise. This is something of a restraint, as it means that the client community reduces the service provider`s ability to deliver the lowest cost, most efficient service. However, it is certain that over time utility service provision will become relatively commonplace.
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