In the old days technology was used to manage a business...to some degree or another. Every company was using technology which often times was similar in its application and features vis a vis the customer. Technology was really not a deciding factor in the success of a business.
The success of a Kmart versus a Sears was not dependent upon which company had the better online offering, nor did they have to worry about the emergence of other players competing for their customers.
Obviously, this situation has changed dramatically for a lot of older and established corporations.
In this day and age technology is used to enable customers to access a corporations goods and services in an easier and more convenient way (who has the better online presence). Additional services never been seen before have developed challenging brick and mortar industries (Uber, Lyft, Airbnb).
In combination all of the above have led to a change in objectives for the CIO.
In the old days the CIO was expected to keep the technology running so that the business processes making the business successful kept on running smoothly.
Nowadays he or she is tasked to create value (innovate) while at the same time reducing costs. Of course, innovate is nothing else than the task to create additional revenues or, at the very least reduce the expense versus revenue spread. (gross margin).
For a lot of corporations the go to solution in their never ending quest to out-innovate their peers is outsourcing Business Processes. The idea is that a high level BPO provider will not only deliver meaningful cost cuts...it is also expected that the technical know how and delivered solution improves upon the Key Performance Indicators the business uses to benchmark its operational success.
The goal to cut costs is nothing new for any business. What is new though is that business use outsourcing to get ready for Web 3.0 or just position themselves better within the Web 2.0 environment. The digitization of the business is no longer something which is done only internally...it is increasingly entrusted to third party vendors.
The graph below shows the results of a Deloitte Study regarding the motivation of CIO's to use outsourcing.
What does stand out is that besides cost cutting the primary benefit/innovation attributed to the outsourced process are :
- Solving Capacity Issues (45 %)
- Creating global scalability (29%)
- Providing access to intellectual capital (28%)
Perhaps the most interesting finding is that in 28 % of the cases the respondent cited the access to intellectual capital as the reason to embark on the process. Barely 15 years ago no organization would have considered an outsourcing relationship as a suitable solution to beef up on intellectual capital.
At the end of the day it remains to be seen is this trend continues. Never the less though it is becoming clear that outsourcing has come a long way.