Out-tasking: Slicing the ITO pie one service at a time

Out-tasking services are increasingly eating away at the $110 billion outsourcing pie. However, these services are not necessarily pure-play cloud platforms — in many cases, they're a combination of the best of both worlds.

Pie
Credit: Ginny

Infrastructure-as-a-Service, Software-as-a-Service, Database-as-a-Service, Desktop-as-a-Service and — wait for it — Innovation-as-a-Service (Digital-Transformation-as-a-Service is still in beta). The industry is flooded with new per-employee and per-gigabyte offerings from traditional providers and a wave of new pure-play entrants. These offerings are slowly but surely eating away at the Tower-based model the industry has relied on for over two decades.

It’s easy to understand why there is such intense interest. As-a-service offerings promise to deliver simplicity, speed and dramatic cost reduction. Compare this to the kinds of environments many buyers find themselves in today with massive complexity, languid response times and increased costs for a diminishing set of services.

Buyers are hungry. The promise of as-a-service is driving demand for these offerings to unprecedented levels.

However, expecting cloud-like features and financials combined with a 99.99% SLA can often lead to disappointment when evaluating these offerings. Long-term commitments, immature service delivery processes and supplier-weighted agreements often leave buyers disillusioned and frustrated. This frustration is most keenly felt when buyers use an outsourcing lens to evaluate these plucky new offerings.

The chasm between traditional and pure-play as-a-service offerings is deep and wide — but that is changing.

A number of managed services providers, and, to a lesser degree, public cloud providers, are embracing the idea that tiered, service catalog-based managed services combined with a highly standard technology platform equals opportunity. Opportunity to insert their standardized operating model into their customers’ operations to make them materially better.

These providers are carving out a unique niche somewhere between IT Outsourcing (ITO) and as-a-service, which is increasingly referred to as out-tasking. These services combine the enterprise rigor of ITO — think comprehensive responsibility matrices, service levels that enterprise IT actually agrees with and reasonable contract terms that don’t saddle the buyer with all the risk, blended with the commercial and architectural benefits of as-a-service offerings, such as consumption-based resource units and guaranteed platform currency.

The catch for these emerging services is that, unlike most ITO and business process outsourcing (BPO) contracts, operational responsibility is shared between the buyer and the provider. This sharing can be weighted toward the provider, or towards the client. What’s important is that this is well understood and documented as part of the contract — mature providers recognize this and insist it be included in the contract framework.

Savvy providers have also taken the time to back through their technology supply chain to re-work contracts, licenses and leases so that they can offer a true as-a-service offering to their clients without taking on unreasonable risk. This allows them to pass cloud-like flexibility on to their buyers.

Looking at the characteristics of a traditional model versus a pure-play as-a-service model, you can see that the emerging out-tasking model sit somewhere in the middle:

characteristics of as a service offerings

It’s important to note that these are broad characteristics and do not, as a group, apply to all sourcing or as-a-service agreements. Of course, every sourcing contract is not over-provisioned for maximum demand, and every as-a-service offering is not commitment-free.

Remember, these services are meant to fill gaps in the buyer’s technology portfolio, supplement spikes in demand or transform a smaller slice of what was traditionally part of an ITO tower. This is not outsourcing per se — it’s out-tasking.

Assuming buyers can find, evaluate and contract with the right partners to help them execute on this opportunity, they’ll likely see tremendous value over the next decade from these types of next-generation offerings. All while eating smaller and smaller slices of the ITO pie.

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