IT Outsourcing Trends 2016
July 22, 2016

Carol Rhiza
Merlin

The IT outsourcing industry is evolving faster than we think. In the fast-paced digital age, organizations continue to leverage their business strategies along with IT outsourcing to meet the growing demands of their customers.

Last year, supplier risk was the primary trend that hit the industry as companies became aware of the risks that their IT provider faces. Multisourcing also became commonplace, as more customers have sought the services of multiple vendors for their several business functions.

This blog takes a look at the trends that can potentially shift the continuously evolving industry of IT outsourcing. With a focus on security, cloud computing, and multi-speed IT, here are the trends to watch out for in 2016.

Security Takes the Spotlight

The cost of security breaches continues to increase. According to a global study by IBM, $3.79 million is the average cost of data breach. The world had also experienced a 23% increase in total costs since 2013.

As cybercrime become more prevalent with increasing sophistication, security then becomes the #1 priority in the IT outsourcing industry for 2016. With million dollars at stake every time a cybercrime attack occurs, IT service providers are finding more ways to increase their clients’ security.

On this note, the rise of specialized security service providers is expected. Organizations are looking for more vendors that offer Security-as-a-Service (SaaS) capabilities.

Data Centers Migrate to the Cloud

This year, cloud computing takes a firm hold in the IT world as organizations invest long term in cloud migration. The platform’s capability to integrate infrastructure, software, and core business functions entices organizations to use cloud-based technologies.

Aside from this, flexibility, scalability, and a lower cost expenditure also drive them to submit to this trend.

Full Service Development Providers Are on Demand

As organizations realize their customers’ demands, as well as the increase in their workload, the necessity for service providers offering full service development has become greater than ever.

Nowadays, organizations do not only seek the coding services of their provider, but also for people who can partner with them in the entire development process. From brainstorming or ideation to software development, maintenance and design — a full service development provider is expected to work diligently with the client.

Vendor Management Offices (VMOs) Are More Popular

Multisourcing is nothing new. But, as the list of their suppliers grows longer and becomes more diverse, organizations start to fumble when it comes to overseeing the work of their several vendors/providers. This is where vendor management offices (VMOs) come in to provide the solution.

As the practice of multisourcing becomes more prevalent, the demand for VMOs also grow higher.

It's More Than the Price Quote

Organizations seek to establish a long-term relationship with their service providers. However, providers realize that gone are the days when companies can be easily swayed to their direction by simply lowering the price of their services.

As the competition in IT outsourcing gets increasingly stiff, service providers attempt to find more amenable ways to keep their customers while enticing large companies at the same time.

Agile Sourcing and Development on the Rise

IT outsourcing already moves at a fast pace, but even more so in 2016. Digitization paves the way for this, as clients try to close deals faster before a competitor could come in the picture.

Similarly, agile development is also on the rise since it involves fast delivery of applications. In contrast to delivering one large application, developers send small, functional bits of the software for the client to test and approve as the project progresses.

The Shift to Multi-Speed in IT

The growing consumption of IT demands organizations to work in multi speeds to keep up with the varying requirements of the business. IT organizations have already been operating at two speeds for a while, but as technology progresses, it is no longer enough.

To adopt to the multi-speed IT capability, organizations need to shift gears in terms of operational model, governance, architecture, and organization.

The IT outsourcing industry is continuously evolving, and it remains a challenge for everyone to keep up. However, with these trends in mind, you can ensure that you won’t get left behind!

Carol Rhiza is a Customer Service Consultant at Merlin.

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