The current economic and regulatory environment, as well as the maturation of outsourcing providers, is leading corporations to consider using outsourcing and other managed services more broadly.
So says Brian Anderson, an executive at software and technology services company, SunGard Systems SA, who adds that this is particularly true in relation to back-office functions, as well as in areas that do not contribute directly to revenues but were previously considered too risky to outsource, such as tax processing, actuarial modelling and retirement plan record-keeping.
According to Anderson, the shift will help firms benefit from service providers' economies of scale and domain expertise, while helping them focus resources on core business areas that directly contribute to revenue generation.
SunGard has identified 10 trends in managed services and outsourcing.
Trends
First, the company believes the business process as a service model will gain momentum because firms can leverage a utility model that serves multiple companies, provides economies of scale and supports an efficient end-to-end business process.
It also says solutions delivered on a software as a service basis will help firms use different software components in the cloud as a single solution, helping them increase productivity.
According to SunGard, customers of traditional business process outsourcing and IT outsourcing services will look beyond application hosting towards industry-specific services that add domain-specific business services and thought leadership.
IT executives will outsource more infrastructure, application management services and custom development so they can devote more of their own resources to core business functions and drivers such as compliance with regulatory requirements, the vendor notes.
It also explains that, as outsourcing matures, service providers will be expected to provide more complex IT services and thought leadership that help firms reduce costs, offer business efficiencies and advantages, and help firms manage an ever greater range of challenges for their clients.
SunGard also believes firms are moving towards service contracts that are based on a variable cost model, which transfers risk to the service provider and helps firms save money and better manage the peaks and valleys of demand.
Firms will look for outsourcing providers that can offer cloud computing to create economies of scale and provide a cost-effective way to handle IT infrastructure and application management, it notes.
Furthermore, customers will see more efficient and higher quality services from outsourcing providers that adhere to best practices, such as COPC, ITIL and Lean Six Sigma.
The increase in regulatory requirements, as well as concern about operational risk, SunGard points out, will lead firms to look more closely at the integrity of outsourcing service providers and to demand strong service level agreements, controls and global certifications and standards.
Lastly, it says, firms will look to managed services providers to operate and maintain new and complex initiatives such as big data and smart grids.
Increased spending
Rodney Nelsestuen, CEB TowerGroup senior research director, believes the financial services industry will increase its spending on outsourcing of services and technology at a rate more than two times that of traditional onsite IT spending through 2015.
"Drivers of this growth include the need to update technology despite tight budgets and deferred investments, vendor innovations in both pricing and the delivery of more bundled IT and service options, and increases in the business value that vendors offer through expanded domain expertise," he says.
"Technology and operations will become more integrated, and software will be embedded with infrastructure, bundled with managed services, and provided through both on-demand cloud services and more offerings of platform-based business process outsourcing."
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