Devott Insight: The Emerging Intelligent Service Industry In Fast Changing Era
Source: Chnsourcing View: 292 Date: 2013-04-24

Written by Sherry Sha

Translated by Gloria Gao

Under the influence of global macro-economy such as commercialization of services, global rebalancing and digitized technology revolution etc., global service outsourcing industry has shown five core changes. The fluctuation of the overall service outsourcing industry is increasingly frequent, a wide variety of contradictions are becoming more prominent, hidden behind this series of industrial fluctuations, Devott deems that the characteristics and development trend of the overall outsourcing industry has achieved a qualitative breakthrough, new industry boundaries and definitions also emerged, the fast changing era of industry has come, it should be given new definition and interpretation.

Devott Research Institute — Sherry Sha, Deputy Director

Recalling the course of the development of the global economy, we can easily find that every economic change was accompanied by the emerging technological revolution, such as the emerge of the steam engine and the application of electricity. The change of outsourcing industry for this time is no exception, as several core technologies that promote the industrial change are Internet of Things, Cloud Computing, Big Data and Mobile Internet etc. Things and things were connected together for the reason of the development of Internet of Things, and were unified into the integrated platform to be transformed and processed via cloud computing, and huge amounts of data that derived from this process are becoming the core assets of industries and enterprises as well as the core driving force of industrial development, furthermore, promoting the development of intelligent business and intelligent industry. We saw the development of emerging technology has built out a digitized virtual world which was balanced with and closely related with the material world. Driven by emerging technologies, the global economy occurred three revolutionary changes.

The first trend is the commercialization of the service. The progress of technology enables service industries to be assessed, implemented and transacted like manufacturing industry. Meanwhile, with increasing maturity of business mode industry environment represented, the scale of service trade erupted into a rapid development. By the end of 2011, the total volume of import & export of global service reached USD 8,000 billion, an average annual increase of 8.8%. It is expected the global service trade scale will exceed USD 40-45 trillion in the next decade.

The second trend is the re-balance of globalization, which reflected in two levels: re-industrialization of the manufacturing and globalization of the service industry. The re-industrialization of the manufacturing refers to that with the maturity of 3D printing technology and its market, the intellectualization of the industry has become the core driving force of the transfer for global manufacturing. The global manufacturing is developing from large-scale manufacturing to mass customization. Innovation and emerging technologies has replaced the original cost and become the core elements that promoting the transfer of manufacturing. It has started to show the backflow trend of manufacturing raised by the US throughout the world that promoted the secondary transfer of manufacturing. From the service industry level, we can regard it as the extension of the commercialization of the service. In another word, the blowout of service business facilitates the global offshore service trade to have shown greater vitality and potential after a short atrophy.

The third trend is digitalized technology revolution. The era of “Big Data” has come. Data analysis capability is becoming the core competitiveness for organizations, and data is turning into the most important asset for organizations as well as the new hub and core elements for promoting the industry development.

Under the impact of the macro-economy, global service outsourcing industry presents five core changes.

1. Re-globalization. It mainly reflects in three aspects, the global service backflow caused by increasing unemployment and political conflict; companies insourcing strategy adoption to reduce risks under the financial crisis; and the rise of the local outsourcing market and the rapid expansion of the overall scale of outsourcing brought by the trend of commercialization of service.

2. Platformization or cloudization. That is under the wave of cloud computing, the cloud mode based “cloud outsourcing” is becoming the mainstream and trend of the development of the outsourcing industry. The whole industry is transforming to cloud outsourcing [CCES (Cloud Computing Enabled Service) mode-oriented]. Outsourcing enterprises establish standardized uniform outsourcing services processing platform to integrate service into a unified cloud platform to accurate the uniform treatment in the database through standardization, modularization and processing. The platformization also further promoted the process of platformization development for the overall industry as well as the prosperity and application of emerging business models such as crowdsourcing, etc.

3. Socialization, the change that service outsourcing is always trying to promote the service and solutions to customization and personalization. The outsourcers are more inclined to divide the large contract into fragments to disperse them to multiple service providers. Meanwhile, the contract period shortens from 5-10 years to 3 years or even less. As a result of that, billion dollars of the contracts no longer exists. The global buyers will focus more on the company’s flexibility and resilience. The outsourcing companies become more specialized and professional. In another word, the company does not have to be very large in scale, but it is a must to focus on one or two specific fields or verticals, or specialized in one technology field. This specialty enables a company to compete in unit price of the service with large outsourcing company in the global market.

4. Intelligentization. With the profound impact of the global financial crisis, the buyers are facing greater pressure on cash flow and strategic transformation. Therefore, they desperate for capable and experienced companies to be their intelligent strategic partnership who can provide them with highly value-added solutions in order to bring them direct economic benefit and facilitate the company’s transformation. For buyers, outsourcing is no longer the way to reduce costs and improve the efficiency, but the important strategic partner to help them achieve the transformation of innovation, risk-sharing and reshaping the core competitiveness of enterprises. Service outsourcing develops more and more value-oriented, and transfer of its core value promotes the entire sector into intelligentization.
5. Innovative development. An investigation from Roland Berger shows that the market performance of innovative enterprises have less negative impacts by financial crisis and recover much faster after the crisis. A company’s innovative performance is highly associated with its business performance. Therefore, more and more organizations are aware of how significant the innovation is to a company’s core competency and sustainable growth. This innovative trend is particularly evident in the service outsourcing industry, either in helping clients to achieve innovation progress or strengthening a company’s competitiveness. From the perspective of differentiation, innovation is becoming more and more important.

As a conclusion, we found a very obvious trend that occurred in the past two years. In the overall transformation of the service outsourcing industry, the two big trends, service product and products service, are becoming more and more evident. For instance, Lanxum and Neusoft launched overall solutions, or Google and Amazon created cloud platform services. More and more new enterprises have begun to enter into the service outsourcing field. Meanwhile, many other industries we used to regard as service outsourcing are broadening their fields, making very difficult for us to judge whether they should be classified into service outsourcing filed by original classification and criteria. Xaas (Everything as a Service) is turning into a core characteristic of the big changing era, definitions and boundaries of traditional industries are being broken. Devott deems that instead of the traditional mode which based on IT infrastructure and company’s demand on business processing, emerging technology has become a core driving force of industry development, and maintains knowledge-intensive service industry as the key feature, re-defined it as intelligent services. The intelligent services are the evolved stage of service outsourcing industry. The intelligent services, evolved from service outsourcing, is a modern services industry driven by technologies which involves traditional IT, as well as emerging cloud computing, big data and mobile internet. It is based on cloud computing platform to conduct implementation and delivery with the characteristics of Platformization, socialization and intelligentization. It is divided into four categories according to its driving elements, IT services, cloud services, data services, and platform services. For more details, please read “The Advent of The Fast Changing Era of Service Outsourcing Industry - White Paper on Intelligent Service Industry Concept”

What is the significance of the coming of big changing era and new definition on outsourcing to Chinese service outsourcing sector? We will introduce Devott concept and advice in the next Devott Insight with respect to the environment and developing route of Chinese service outsourcing.

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