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Robots, security as a service, cloud galore, shape ITO-BPO 2016 outlook

Heads-up from the ITO/BPO experts at global law firm Mayer Brown — look for dozens of new developments in the IT and business process outsourcing market in 2016. Among the trends outlined in the firm’s recent webinar:

Attorneys Rebecca Eisner, Paul Roy, Brad Peterson and Dan Masur, partners in Mayer Brown’s business and technology sourcing practice, see 2016 ITO-BPO market changes as falling under four broad themes. Here’s a recap of the highlights.

1.  Emerging technologies transform ITO-BPO services

Paul Roy_mayer

Paul Roy

Cloud goes mainstream. Everyone wants a piece of the cloud services market — traditional ITO/BPO providers, which now are making cloud a standard part of their services, as well as software and products companies seeking to defend and expand their turf. As a result, cloud vendors are losing their special status (and just maybe their “my way or the highway” attitudes) as more flexible and customized ITO/BPO services come on the market. “Buyers should develop well-organized approaches to buying cloud,” Roy said.

Here come the robots. ITO and BPO companies are “close to exhausting opportunities to move work closer to lower cost people,” Roy said, and are moving the work to machines. “For example, in BPO we are seeing this with automated email and document scanning that gathers the required data for automated entry and routes that data to the various business functions,” he said. Buyers with contracts designed to purchase human labor “will need to re-evaluate their existing deals and reconcile their contracts to this new world.”

Digital services deployed for competitive advantage. Cloud and digital services, in case anyone needs reminding, should not be viewed as just cost-cutting measures but as vehicles for improving a company’s competitive position. Case in point: the equipment manufacturers using Internet of Things (IoT) to allow customers to better manage and monitor their products — and the “tremendous benefits” derived from capturing and analyzing all the data.

2.  Multi-sourcing will push demand for integration services

Dan Masur_Mayer

Dan Masur

The provider list keeps getting bigger. “In the last two years, we have worked with more than 50 providers and the trend is continuing. These range from cloud providers such as Amazon and Salesforce.com to Rackspace to everything-as-a-service providers,” Masur said. In addition to the big name cloud providers, customers are looking at emerging digital technology providers to help them become “truly digital businesses.”

ITO integration services are in demand. The more providers companies hire, the harder it is to integrate all of these services. “Many of the most powerful cloud technologies will require integration efforts comparable to those required to install [enterprise resource planning] systems,” Eisner said.

IT organizations don’t have enough people trained in managing these multiple platforms and providers. “Companies will have to hire the expertise for service integration, incident management, change management and other important cross-functional areas” she said.

Provider partnerships are increasing: Last year saw formal teaming between Accenture and Amazon, PwC and Google and HCL and Microsoft, as vendors scrambled to meet high customer  demand for integrated services and risk mitigation. Expect more such partnerships.

3.  Cybersecurity and data dominate the risk agenda

Poor security will cost you. Cyber threats, now a board-level topic, will only increase as IoT and other telematics are used in consumer and commercial products. “Regulators have clearly taken note and will exact increasingly large fines for poor security,” Roy said

Rebecca Eisner

Rebecca Eisner

Security as a service arrives. In response to increased cyber-risks, companies will rely on third party specialists for managing information security rather than on relying just on their outsourcing partners or on trying to manage security themselves, Eisner said. These security specialists will identify weak links and security gaps between outsourcing providers.

Data protection and privacy laws on the rise. The end of Safe Harbor  for the transfer of personal data out of Europe and passage of a Russian law requiring that data remain in Russia, will challenge customers and ITO/BPO providers. The Mayer Brown experts predict more data centers will be located in Europe to address some of these concerns.

4.  Deal pace, M&A drive ITO-BPO activity

Deals are getting done at warp speed. Competitive pressures have forced deals to “run faster and faster,” according to Peterson. Under pressure to act fast, companies are “fielding substantial negotiating teams working on an agile basis to close smart deals fast,” he said. They also are using a variety of forms, tools, template and instituting policies that will help them move quickly when a market opportunity arises.

Brad Peterson_mayer

 Brad Peterson

Banner 2015 M&A activity gives rise to reconfigured IT services. Record merger-and-acquisitions in 2015 are driving ITO, BPO and cloud activity, as companies rationalize the IT and business processes they inherited.  Said Roy, “2016 will be a banner year for ripping apart shared service centers and service contracts — and replacing them for the newly configured companies created by those M&A deals.”

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