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BCG: Future of outsourcing points to fewer service providers

Research on post-pandemic outsourcing trends reveals shifts in organizations' thinking about service providers and digital transformation initiatives; other news.

Companies that spend heavily on IT and business process services could grow more selective about their service providers and how they deploy them on digital transformation projects.

That's according to a new report by management consulting firm Boston Consulting Group (BCG), which calls into question the future of outsourcing in the post-pandemic era. BCG's research suggests companies will continue to rely on IT service providers: About 89% of the 200 companies BCG polled said they expect to increase their dependence on IT service providers over the next two years. However, companies will demonstrate "a lot more nuanced thinking about how to work with service providers," said Hrishi Hrishikesh, partner and director of digital transformation at BCG and one of the report's authors.

Survey respondents said they work with as many as five service providers, on average, but that "developing deeper relationships with fewer partners may be the way to go." The pandemic, and how service providers reacted to it, has influenced companies to reconsider their partner rosters, Hrishikesh said.

He said companies found some service providers "went beyond the call of duty to get their clients up and running quickly," while others primarily looked for opportunities to expand their businesses and make more money. As a result, some customers have reprogramed their investments to work with a smaller set of companies -- particularly those that distinguished themselves as strategic partners.

The winnowing of partners mostly applies to larger systems integrators and outsourcing firms, as opposed to smaller MSPs and specialized service providers, Hrishikesh noted. These smaller companies tend to have more capabilities related to cutting-edge technologies such as AI and machine learning, he said.

The surveyed companies' digital transformation plans were also nuanced. Prior to viewing the survey results, Hrishikesh said he expected to see a binary response to questions about transformation projects: Respondents would either report stalled or accelerated initiatives. Instead, companies said they would accelerate some projects and slow down others.

BCG's survey reported that 96% of respondents expect to speed up the execution of transformation-related projects over the next 24 months. Investments in cybersecurity will lead the way, followed by automation; cloud migration as a cost-reduction measure; AI, machine learning and analytics; and crowdsourced innovation. But 76% of the companies expect to slow some transformation efforts in areas such as HR processes.

Against that backdrop, the task for companies is to select specific transformation thrusts, determine the capability gaps they need to fill and choose the appropriate services provider to help with their initiatives, according to BCG. IT service providers, in turn, will need to cultivate digital innovation ecosystems to meet customer demand.

"I think the biggest service providers are pretty clear about how they need to integrate broader ecosystems of providers into what they bring to the table," Hrishikesh said. Those ecosystems encompass the major cloud platform providers as well as cloud-native companies that deliver products in fields such as data science, he added.

In general, customers need to be more thoughtful about which capabilities they want from their IT service providers. "It's not a one-size-fits-all answer," he said.

Other news

  • Accenture aims to make its first purchase of an industrial robotics solutions provider in its pending acquisition of Pollux, based in Joinville, Brazil. Pollux, which optimizes manufacturing and logistics processes, will extend Accenture's capabilities in the consumer goods, pharmaceutical and automotive industries, according to the professional services company. The deal spans Pollux's operations in Brazil, Ecuador, Mexico, Canada and the U.S. The company's 290-plus professionals will join Accenture's Industry X group.
  • Rahi, an MSP based in Fremont, Calif., launched a platform-as-a-service offering that delivers subscription-based technology frameworks spanning networking, security, A/V collaborations and managed services. The PaaS offering includes products, installation and managed services, and other components.
  • Taeknizon, a private cloud service provider in the Middle East and Asia, will provide a cloud migration strategy for LuLu International Exchange, a financial services provider in the UAE. LuLu International Exchange's data will be locally hosted in Taeknizon's Taekni Cloud Infrastructure in a Tier III data center in the UAE.
  • VMRay, a Boston-based provider of automated malware analysis and detection technology, extended its Ingram Micro Inc. alliance into the U.S. market. VMRay had inked an earlier agreement with the distributor in Europe.
  • Pax8, a cloud distributor based in Denver, unveiled MSP Foundations, an eight-week instructor-led course that covers finance, sales, marketing and operations. The course is geared toward MSPs with five or fewer employees, as well as new MSPs that have offered managed services for less than two years, according to Pax8. The company offers the course through its Pax8 Academy partner education program.
  • D&H Distributing, a distributor based in Harrisburg, Pa., partnered with Nextiva, a cloud communications company.
  • Datto is offering MSPs a Silver Sparrow detection and prevention script, which performs a check for files that could provide an indication of local infection with known paths.
  • Netrality Data Centers, based in Surfside, Fla., unveiled a channel partner and strategic alliances program. The program lets partners tap the company's ecosystem of providers, which includes network carriers, cloud providers, CDNs and MSPs.
  • Axonius, a cybersecurity asset management company based in New York, said it signed up nearly 70 partners worldwide since launching its Correlated Partner Program in April 2020. Sixty percent of the company's revenue in the third and fourth quarters of 2020 came through channel sales, according to Axonius.
  • Assured Data Protection, an MSP focusing on cloud data protection, rolled out an extended detection and response (XDR) service. The company, which has operations in Washington, D.C. and Leeds, U.K., offers the service through its partnership with Confluera, an XDR platform provider.
  • Lunavi, an MSP and digital transformation consulting firm based in Cheyenne, Wyo., launched an Azure Adoption Program. The company said the program aligns with the Microsoft Cloud Adoption Framework, a collection of implementation guidance, best practices and tools.
  • DigeTekS, an MSP based in Frederick, Colo., recommended Nexan's all-flash E-Series 18P storage platform for Wyoming Surgical Associates, a general, vascular and spine surgery medical practice. The storage system supports business applications such as Microsoft SQL Server, Microsoft Exchange and Citrix, as well as medical applications including picture archive and communications systems and Lytec MD medical billing software.
  • The World Bank partnered with the NRD Companies, an IT and consulting group focusing on e-governance, to digitize and automate Palestine's business registry. That initiative is part of the World Bank's Innovative Private Sector Development Project, which aims to improve economic opportunities.
  • MorganFranklin Consulting, a finance, technology and cybersecurity advisory firm based in Washington, D.C., appointed Matt DeFrain as senior director of cybersecurity business development within the company's cybersecurity practice. DeFrain was previously managing director of crisis management and resilience at Deloitte and director of cyber security and business resilience at KPMG.
  • Nimbl, a digital strategy and business solutions consulting company based in Denver, hired Robert Jerome as vice president of strategy and innovation for North America.
  • Invicti Security named John Andrews as vice president of global channel for Acunetix and Netsparker. Based in Austin, Texas, Invicti provides application security testing services and tools.

Market Share is a news roundup published every Friday.

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