The future of outsourcing

"Effective service management, therefore, becomes the key ingredient to ensuring that these models are successful."

Walker says the need for effective management becomes even more pivotal as organisations introduce cloud-related services. He says the IT industry has been responding with the development of service integration and management (SIAM). This remains an embryonic area, but the aim of SIAM is to maximise performance across all providers and services.

Those who have been sleep walking have little choice but to transform through outsourcing and that is not a great position to be in.

"For this function to be as effective as possible, it requires a consistent, shared vision, a robust project structure and perhaps, most importantly, a continuous service improvement culture," says Walker. "This comes with its difficulties but as the ecosystem becomes more mature, it should be easier to manage."

Smart IT leaders are already working with change. Indeed, organisations that have taken a pro-active approach to the changes enabled by digital technology will probably not need to rely on outsourcing, according to JJ Van Oosten, group CIO at building supplies specialist Travis Perkins.

"They have built in-house capabilities which are giving them real competitive advantages," he says.

"They might even be adopting cloud services, and managing those to adopt velocity and agility, or embracing collaboration," he adds, pointing to the fact that his own organisation, Travis Perkins, is working with Google to transform business operations as quickly as possible. "The move is sending a big signal to our 25,000 employees: Travis Perkins is going digital." he says.

"We already see huge benefits from an enterprise social networking perspective, such as travel reductions and faster meetings. Those who have been sleep walking have little choice but to transform through outsourcing and that is not a great position to be in."

Mark Foulsham, CIO at insurance specialist esure, also recognises that a shift in outsourcing is taking place. He says Cap Gemini is his firm's key provider and that HCL has a significant presence, too. But like many of his CIO peers, Foulsham also works with a collection of suppliers on smaller contracts.

"There's a swing taking place across the market towards more balanced service provision and tailored partnering," says Foulsham, who recognises that some executives are looking at service integration specialists to help make the most of a diverse supplier base. He believes the demand for different types of outsourcing can only be considered within the particular business context.

"Some organisations might prefer the economies of scale associated to working with just one or two key providers. Others might be more interested in the innovation that can be generated through multiple suppliers. There is no magic equation CIOs must make decisions based on their business requirements," says Foulsham.

"CIOs need to consider where they draw the line in regards to back-end infrastructure, apps and front-end services. For us, we must keep tight control over databases and the front-end those areas are the crown jewels of our business."

Danny Reeves is another IT leader who is still looking to use outsourcing as a tactical solution to non-core business challenges. As CIO of the services division at Balfour Beatty, he is responsible for IT across the firm's infrastructure services. His division also houses the WorkSmart business, a managed service provider that helps organisation's increase performance by reshaping systems and processes.

"We've taken the decision as an organisation to partner with providers who focus on our non-core business activities," says Reeves.

"We're not an IT company but we really appreciate the value of technology and using those capabilities on behalf of our customers. We want to use the knowledge of our external partners to help the business focus on its core strategic values of economic growth and customer service."

Balfour Beatty recently signed a five-year outsourcing deal with Fujitsu. As part of a transformation partnership, the IT specialist will host and manage the company's data in a shared storage environment, using a combination of physical and cloud-based virtual data centres. Fujitsu will also provide desktop services and support for 14,000 users in the UK. Reeves says the contract represents the new approach to outsourcing, where provider and customer work in combination to meet flexible line-of-business demands.

"We've been able to agree a unit-based price and a utility-like deal that allows us to grow locally and globally with agility," he says. "We're not locked into a minimum spend, but there are massive areas of change that we want to tackle. We can also work with other strategic partners. It's my job to integrate those partners as part of our WorkSmart business."

Mark Samuels
Freelance journalist

Mark Samuels is a freelance writer specializing in business and technology. For the past two decades, he has produced extensive work on subjects such as the adoption of technology by C-suite executives.

At ITPro, Mark has provided long-form content on C-suite strategy, particularly relating to chief information officers (CIOs), as well as digital transformation case studies, and explainers on cloud computing architecture.

Mark has written for publications including Computing, The Guardian, ZDNet, TechRepublic, Times Higher Education, and CIONET. 

Before his career in journalism, Mark achieved a BA in geography and MSc in World Space Economy at the University of Birmingham, as well as a PhD in economic geography at the University of Sheffield.