Continued from SaaS, Shared Services, BPO – Will they converge?
Recently, we had a presentation from one of the Big 5 of the Indian IT services firms. The topic of the presentation was Outsourcing – integrated IT as well as process outsourcing. The speaker was an enterprising and enthusiastic chap who clearly oversold the service offerings from his company. At one point in time he claimed that his firm could also carry out some of the core value chain activities such as medical underwriting for us. I couldn’t help but wonder if now these outsourcing service providers are going to forward integrate and set-up banking and insurance businesses as well.
On a more serious note, there seems to be a lot of value in offering and opting for integrated IT and process outsourcing services. In such a scenario, the outsourcing service provider takes care of execution of back-office processes as well as development and maintenance of IT applications and infrastructure. In a more matured model, the outsourcer or outsourcing service consumer will be transparent to (or least concerned about) what IT systems are being used by the outsourcee or the outsourcing service provider. And obviously, the service provider will charge the consumer based on transactions.
What is the merit for service consumers to go for such a business model? Outsourcing service consumers will then have to just deal with 1 or 2 strategic vendors so that they could focus on core activities such as marketing, product design & pricing, and branding.
Is this model conceptually new and never tried and tested before? I wouldn’t say so. Electronics industry in Japan and US has already undergone this revolution. Today giants in this industry are just focusing upon marketing, new product development and branding, while manufacturing is completely outsourced to their vendors in Taiwan.
What to expect in future? Consolidation will continue in IT Services, SaaS, Shared Services and BPO space. Some of the IT services firms such as TCS, EDS, CSC, Mastek, Infosys already have a packaged solution for insurance &/or banking industry. Most of them also have a strong footprint in BPO space. These firms are well positioned to offer integrated IT(SaaS, Application Development & Maintenance) and process outsourcing services.
Here are some interesting developments, which confirm this theory:
– Infosys renames Progeon as Infosys BPO
– IBM Acquires Daksh To Bolster Offshore BPO Skills
– Wipro acquires Spectramind and later renames it as Wipro BPO
– TCS signs $848 Million plus deal with Pearl
– TCS acquires BPO firm in Chile
I won’t be surprised if one of the big IT services firms goes ahead and acquires SaaS firms such as Salesforce.com. Will they also acquire product companies? Well, for that we’ll have to wait and watch how the industry evolves.