The traditional model of outsourcing is undergoing a transformation, and there are different theories on what the next model may be. One theory is that the multitude of service providers in India will be replaced by the likes of Google (NASDAQ: GOOG) and Amazon.com.
Just as software sold on disks is being replaced by apps, and desktops are being replaced by laptops, legacy outsourcers will give way to providers who leverage economies of scale, argue Arjun Sethi and Olivier Aries in a BusinessWeek article.
Instead of providing customized software, systems integration and long-term contracts, the new outsourcers will deliver off-the-shelf software on a pay-as-you-go basis, providing greater flexibility and efficiency.
“Thousands of server computers can attack a task more quickly–and cheaply–or handle a patchwork quilt of different technologies that companies use to run their businesses,” Sethi and Aries wrote in a column at BusinessWeek.” This approach will let businesses outsource entire tasks such as the tracking of inventory, paying only for the information accessed or used.”
This evolution is taking place because traditional vendors have eked all the efficiencies they can out of low-cost labor and automation, the authors maintain.
Cloud computing offers a new way to lower costs. “It shifts the center of gravity in outsourcing from physical ownership of assets and process expertise. It focuses on the skills necessary to efficiently manage computing operations that can scale and at the same time are flexible enough to handle scores of different tasks,” they write.
The winners in this sea change, they predict, will be companies like Google and Amazon.com; and possibly Microsoft (NASDAQ: MSFT), Oracle (NASDAQ: ORCL) and SAP.
To stay in the game, leading outsourcers in India will have to form alliances and acquire other companies to gain the necessary scale.
Source:http://www.fiercecio.com/story/will-google-amazon-be-next-big-outsourcers/2010-08-11
