Sourcing Disruption: Analytics, Automation and Cloud

“The future is already here. It’s just not very evenly distributed.”

Science fiction writer and futurist William Gibson said that way back in 2003 — quite a prescient statement given that today, for the first time in history, the gap between productivity and employment is widening.

Why is this happening?

Pundits suggest it’s policy-related (either too much if you’re on one side of the aisle, or too little if you’re on the other). Although policy certainly plays some role, what is interesting is that very little discussion is happening about the role technology is playing in this increasing gap.

Very smart folks such as Erik Brynjolfsson (Director of the Massachusetts Institute of Technology Center for Digital Business) argue that policy is certainly a contributor, but there is something more — he refers to it as the “Great Decoupling.” Basically, the changing nature of technological progress, enabled by digitalization, is fundamentally changing our economy. This change puts a premium on digital labor over human labor. According to Brynjolfsson, this gap will only increase as Moore’s Law exponentially increases the power of computers and at the same time drives down their cost.

For many of us, the question is: How will this impact the sourcing industry?

The short answer is that we’re already seeing the effects today. Dramatic improvements in the business-to-consumer experience are rapidly changing expectations for what a business-to-business provider should bring to the table. Clients are increasingly expecting dramatic cost reduction driven by automation, increased speed driven by cloud, and innovative new insights driven by data analytics. They are also expecting outcomes. According to J.B. Wood is his excellent new book, “B4B”:

“Customers need their suppliers to step up and get into the outcome game. Who owns the asset is not the critical question anymore—in fact, customers often now view owning the asset as a negative.”

Savvy providers are responding to this challenge by building and partnering with standardized, platform-based services that decrease the labor component in their services and provide deep levels of data analytics, based on a multi-tenant data model. They are also increasingly taking on more risk by committing to business-focused outcomes, often focused on committed savings. Although these types of services are still nascent, and require a new level of partnership and trust between buyer and seller, we see a number of providers taking the plunge. We also see an increasing number of clients willing to consider these Level 3 service providers.

I’ll be discussing this exciting topic along with Steve Hall at the ISG 2014 Sourcing Industry Conference, in Dallas. Steve and I are also excited to have Gravitant Chief Executive Officer, Mohammed Farooq, presenting with us.

We hope to see you there.

About the author

Stanton helps enterprise IT and sourcing leaders rationalize and capitalize on emerging technology opportunities in the context of the global sourcing industry. He brings extensive knowledge of today’s cloud and automation ecosystems, as well as other disruptive trends that are helping to shape and disrupt the business computing landscape. Stanton has been with ISG for more over a decade. During his tenure he has helped clients develop, negotiate and implement cloud infrastructure sourcing strategies, evaluate and select software-as-a-service platforms, identify and implement best-in-class service brokerage models, and assess how the emerging cloud master architecture can be leveraged for competitive advantage. Stanton has also guided a number of leading service providers in the development of next-generation cloud strategies. Stanton is a recognized industry expert, and has been quoted in CIOForbes and The Times of London. You can follow Stanton on Twitter: @stantonmjones.