Shared IT Service Delivery: A Phoenix Waiting to Rise? Business Landscape
From the heydays when IT companies across the globe saw dramatic quarter on quarter growth, we live in a world today where large IT players are seeing a growth plateau. As the cost compression of labour arbitrage begins to hit a saturation point, we're seeing this sentiment being echoed in stock performances across indices around the world. Nimble-footed, leaner tier three companies with a bigger appetite for innovation are carving a greater share of the future for themselves. We may well be seeing beginning of the end of IT service delivery as we know it, giving way to a disruptive new model that is higher on efficiency and lower on cost. Almost like a proverbial Phoenix that rises from its own ashes.
The traditional service delivery is familiar and comfortable: it happens in linear mode, completely dependent on the people resources allocated to a project. Everything revolves around how many project resources are deployed - everything from the hourly billing to the onsite-offshore arbitrage. Even outcome based projects have their grounding in the resource equation. The IT solutions partner commits to a timeline, people deployed, project phases such as design, execution, testing and production.
In the new paradigm, IT solution partners will begin with requirements; they will agree on milestones and the delivery schedule, and nothing else. The game-changing innovation comes from the fact that the resources assigned and infrastructure deployed remains vendor's prerogative, with the client not privy to how the work gets done. Everything will be done on a completely new outcome based approach that rewrites the rules of the game dramatically.
The Offshore Development Centre (ODC), a client-owned site at the vendor's premises, will give way to a command centre of shared component building services. Envisioned as a virtual environment, it will be a factory that reuses components from across clients serviced in the past leveraging a deep repository of code to deliver to clients' needs faster and with lower costs.
Naturally, it calls for disruption in the way contracts are approached. Legal compliance will need to be taken care of in the absence of physical ODCs. The question of Intellectual Property (IPs) may be a tough but not insurmountable challenge. As I see it, the solution delivered to the customer forms part of the customer IP, but the ingredients and smaller building blocks that it is comprised of remain the IP of the vendor. This will enable the vendor to offer a reusable component as part of a solution to other clients requiring similar functionality.
The prospect of turning the way IT service delivery works right on its head gives many large companies the jitters. It is safe to say that this is an idea that is in its infancy, but I foresee that in the next five years, these new hybrid service delivery models will find acceptance as the pressures of delivering more with less mounts on our industry.