IT outsourcing should not hinder innovation - it's time to rethink

Currently, nine out of ten Fortune 500 companies have outsourced some of their IT functions, but many of them have not yet understood all the advantages. They are often locked in long, inflexible contracts that provide only marginal savings and entail limited mobility and flexibility due to loss of control. However, times have changed, technologies have changed, and business priorities have been revised. In the digital age, traditional IT outsourcing models (ITOs) can no longer work effectively. It's time to rethink and change the conditions.

Digital transformation occurs right here and now. The convergence of cloud, social, mobile, analytical applications and the Internet of Things (IoT) is the creation of new products, services and even business models that were unthinkable just a few years ago. Studies show that companies that firmly believe in the benefits of introducing new technologies are more likely to more quickly generate revenue and market position.

In order to be agile, dexterous and realize the potential of digital technology, companies can no longer afford to be bound by inflexible service delivery models. The limitations of the traditional model of outsourcing - with their rigid scope of work, scattered operations and KPIs, as well as cumbersome long-term contracts are unacceptable.
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Digital transformation requires the introduction of flexible models in order to encourage innovation, and this has a significant impact on the search for solutions. Discussions are based on three factors.

Performance . IT outsourcing has historically focused on cost savings through flexibility and future innovation. To ensure that the process does not happen again, the measurements should be fully focused on the core business indicators, and suppliers will receive result based contracts. This will encourage partners to integrate their own solutions with third-party value-added products and continuously improve services that will increase efficiency throughout the contract life cycle.

For example, security, an essential function, is often outsourced, since many firms are not able to keep up with real-time threats, having limited internal resources. Specialized security organizations can offer global visibility via the Internet in order to detect new attacks and develop protective measures. Here, the results are also measurable - the time spent on fixing zero-day vulnerabilities, or the organization’s assistance in complying with payment card data security standards (PCI DSS).

Platform . The digital business revolution brought about by cloud, social networks, analytical, mobile applications and the Internet of Things (IoT) will continue to determine for the company which functions they will outsource. Service-oriented models can help provide flexibility, versatility, efficiency, and cost reduction, but should only be applied when they add value.

For example, cloud-based and service-related offerings allow companies to shift IT supply costs to operational costs when they pay for what they consume. It also frees companies from having to invest heavily in assets such as data centers, which may have to pay back 20 years. Instead, they can simply buy what they need, when they need it.

Partnerships . ITO should not be considered only as a simple transfer of the problem / service to third parties and exclusion from participation in the problem. Companies must carefully select partners and ensure that they work well together for the success of their current operations. Digital transformations are driving the era of 'Smart Partnership', and I will share some thoughts and guidelines in the following articles.

Obviously, to become one of the most successful digital companies in the future, an organization needs to find new ways to interact with technology partners and use this experience in its business. They should be able to quickly recognize and respond to potential business opportunities, respond quickly to changes in markets and should not be connected in fixed ways of working in order to get ahead of competitors.

In my next article, I will look at the rise of a new ITO mindset. Will traditional ITO models support the digital age and what are the other options?

About the author : Robin Schlee is vice president of Verizon Global Integrated Solutions. He manages a global organization responsible for the development, acquisition and implementation of large complex IT infrastructure agreements with corporate clients, including in the retail, banking, financial services, oil and utilities sectors. He is also responsible for the development of Verizon's outsourcing, integration and management of significant services.