The political winds of change are certainly blowing, and enterprise leaders are faced with a dizzying array of possibilities. But the “ostrich strategy” is a sure path to disaster. It is no time to get caught off guard. The shifting regulatory climate should be prompting many executives to rethink how they might source their IT services in the event non-domestic sourcing becomes unfavorable. What would be your response if the CEO asks what services your organization should repatriate?
The fact is, the value of outsourcing has grown far beyond simple labor arbitrage. CIOs, CFOs and COOs are looking for creative ways to continue to deliver value to the business by structuring environments that incorporate digital and automation solutions, platform strategies and other efficiency gains that have made traditional outsourcing a successful business strategy.
To make the most of a potential repatriation initiative, first analyze your current sourced services and identify opportunities that can be performed by an onshore service provider or in-house resources.
Consider the following three questions when developing a repatriation plan:
- What can you automate? Robotics, autonomics and cognitive solutions—which ISG Research has shown increase productivity and reduce costs for both outsourced and retained services—are becoming part of the standard offering from many service providers. Automation-as-a-Service (AaaS) and managed-service solutions that incorporate automation are reducing the dependency on low-cost offshore resources. They are also changing the onshore/offshore resource ratio and resource skillsets needed to support services. Looking for opportunities to automate information technology, business process or back-office functions should be an important part of developing a repatriation plan.
- How can you refine your operating model? If an operating model doesn’t evolve to keep up with an enterprise’s changing business needs or if it doesn’t take advantage of advances in technology, it can become stale and outdated. Adopting agile-based and DevOps-based IT methodologies, which enable developers to increase speed to market, means an enterprise must also adjust and refine its operating model so the rest of the firm can keep up. When an enterprise adjusts its operating model, it must consider adjusting what work is performed, who performs it and where it is performed. A strong repatriation plan will include an operating model assessment to understand how changes to the model could benefit service delivery.
- What can you learn from reviewing your contracts? Understanding which services are currently sourced and the contract terms that guide service provider relationships is an important step in identifying functional areas to bring back in-house or leverage onshore solutions. The sourcing landscape changes rapidly, and certain options that are available now may not have been available at contract signing. After living with a contract for some time, an enterprise has a better understanding of how it is consuming services and how the strengths and weaknesses of the incumbent service provider are playing out in its IT environment. Take time to develop tactical plans that align your contracts and consumption of services to a broader strategy. While repatriation of services may sound good to leadership, careful analysis of existing contracts and the financial impacts of change is needed to make sound decisions.
The sourcing equation today is changing rapidly, with companies depending less on low-cost labor and more on technology to create efficiencies and improve savings. The goal is to improve agility and enhance competitive advantage, and this happens, at least in part, by tuning up target operating models and service delivery techniques. ISG can help you identify repatriation opportunities and develop a roadmap to guide you along the journey. Please contact me to learn more about how ISG can help.About the author
Bill Shoemaker is a Director in the ISG Manufacturing, Communications and Media Industry Vertical Organization performing the role of Vertical Delivery Leader and Global Applications Domain Leader for ISG. He brings extensive experience in strategic outsourcing to ISG’s clients. Bill’s experiences include all aspects of the outsourcing advisory space, including IT Sourcing Strategy, Application Development Maintenance (ADM), Service Level Agreements (SLAs), and Business Process Outsourcing, Governance, offshore delivery, project management and implementation of various software development methodologies. His knowledge comes from practical experience implementing global models and advising clients with their sourcing strategies, transaction and transformation initiatives