In the next five years outsourcing as we know it will disappear. The legion of Indian service providers will be sidelined or absorbed. U.S. and European companies that pioneered this corner of the high tech industry will suffer similar fates if they don't wake up. Who will emerge as the new leaders? Google (GOOG) and Amazon.com (AMZN), brands that we associate with search and retail, will become better known for outsourcing.
Ludicrous? Not if you follow this industry. Desktop computers yielded to laptops. Web portals AOL (AOL), MSN (MSFT), and Yahoo! (YHOO) are giving way to social media sites Facebook, Twitter, and LinkedIn. Software once distributed by disk is now available as apps over the Web—often for less than the cost of a slice of pizza. And so it goes. The same Darwinian process is creating a fresh ecosystem in outsourcing, one that will usher in an era of consolidation and a new way of working with clients.
Traditionally, outsourcing companies sell customers deals that can span a decade and easily run to tens of millions of dollars. The service provider takes on the expensive, time-consuming task of building and operating the digital tools that the customer requires to vanquish the competition, often involving development of custom software to get the job done. To do that, service providers need aisles of powerful computers, armies of programmers, and lots of applications, which are housed either at the client's site or located at a third-party data center that's usually owned and paid for by the client but managed and maintained by the outsourcer. Accenture (ACN) is a good example of the old model
Ludicrous? Not if you follow this industry. Desktop computers yielded to laptops. Web portals AOL (AOL), MSN (MSFT), and Yahoo! (YHOO) are giving way to social media sites Facebook, Twitter, and LinkedIn. Software once distributed by disk is now available as apps over the Web—often for less than the cost of a slice of pizza. And so it goes. The same Darwinian process is creating a fresh ecosystem in outsourcing, one that will usher in an era of consolidation and a new way of working with clients.
Traditionally, outsourcing companies sell customers deals that can span a decade and easily run to tens of millions of dollars. The service provider takes on the expensive, time-consuming task of building and operating the digital tools that the customer requires to vanquish the competition, often involving development of custom software to get the job done. To do that, service providers need aisles of powerful computers, armies of programmers, and lots of applications, which are housed either at the client's site or located at a third-party data center that's usually owned and paid for by the client but managed and maintained by the outsourcer. Accenture (ACN) is a good example of the old model
