How much would you pay to have your shoe laces tied?
Source: The Outsource Blog View: 400 Date: 2012-02-23

Outsourcing is recognised as an effective way to curb costs. Rather than expend time, energy and money on getting your own IT infrastructure set up, why not get someone else to do it? This is already being experienced in the ICT industry, through the use of hosting, cloud and managed services. Egypt, South Africa, Kenya, Nigeria, Morocco, Senegal, and Mauritius, are considered to be primary outsourcing destinations in Africa, and have attracted foreign direct investments from countries like India, UK and the Netherlands. South Africa is leading the outsourcing market across areas such as customer support, financial services, legal administration and other back-office services.

If tying your own shoe laces disrupts your life, there is someone out there that will do it on your behalf – at a price. In the enterprise IT outsourcing market, technology vendors, network operators and system integrators are major service providers in South Africa. Business and knowledge process outsourcing services provide a new means of IT outsourcing, by leveraging emerging technologies such as cloud computing, data centres, and Software as a Service (SaaS). Outsourcing, will not only facilitate the improvement of customer services, through deploying cost-effective IT platforms, such as Infrastructure as a Service (IaaS) and SaaS, but also reduce Capital Expenditure (CAPEX) and Operational Expenditure (OPEX), particularly for service providers with international footprints.

IT and customer support services are fast becoming the most outsourced services by enterprises. These two service categories require outsourcers to procure necessary hardware and software to support the provision of IT systems and contact centres. IT and customer support outsourcing services provide an opportunity for leading telecommunication equipment vendors, such as Ericsson, Nokia-Siemens Networks, Alcatel-lucent, Huawei Technologies, ZTE Corporation, and network operators such as Vodacom, MTN, Airtel and Orange, to provide network infrastructure, hardware, software and devices required in the outsourced enterprise IT systems. These companies have one thing in common – they specialise in infrastructure development and enterprise communication networking services, such as cloud computing and managed services.

Tying shoe laces may seem like an easy task, but what if you needed the knot to look like a butterfly, with one wing slightly larger than the other? Firms that require specialised services have a higher propensity to outsource. IT outsourcing is becoming popular as new emerging trends such as unified communications, managed services, cloud computing (i.e. hosted data centres) and enterprise mobile applications arise as new solutions to assist enterprises in reducing OPEX. Nevertheless, the deployment of such solutions requires significant investments in network infrastructure in order to build new systems and/or integrate them into existing IT architecture of enterprises. IT outsourcing (i.e. managed/hosted IT services) is, therefore, a unique and innovative area to generate new revenue streams for channel partners, including internet service providers (ISPs), system integrators and network operators.

After considering the bottom (enterprises) and the mid-layer (channel partners) of the outsourcing business value chain, technology vendors such as Ericsson, Cisco, IBM and Microsoft see themselves sitting at the upstream. They all have the opportunity to start providing the required equipments, applications and maintenance services to ISPs, system integrators and network operators, who are directly interacting with enterprise end-users. Future primary verticals that are expected to see strong growth include, large enterprises in retail, oil and gas, and mining industries and small-and-medium sized enterprises (SMEs) which are driving the demand for IT outsourcing services in South Africa.

In the financial services industry, banks and insurance companies have seldom outsourced their IT systems, due to data security and confidentiality. It will, however, be unlikely that this will continue, as most large enterprises in the financial services industry spend hundreds of thousands of US dollars per month on IT and telecommunications services. Sometimes the enterprise is too large to easily bend over and deal with those pesky shoe laces. Outsourcing can be more effective and most importantly, cheaper. This presents a huge opportunity for telecommunications service providers, such as Vodacom and MTN, both in and outside of South Africa. Sentiment in the market is that services are designed according to the sizes of enterprises. With private cloud services designed for the financial services industry, incorporating security and regulatory aspects, we believe virtualisation strategies, applied in designing solutions, will drive the uptake of outsourcing services. This is mainly due to the fact that solutions are becoming more scalable and flexible in standard offerings.

An opportunity exists in enterprise mobile solutions in the financial service industry through the development of security solutions. This would protect banks and insurance companies from IT risks. This is one of the major banking threats in South Africa, as stated in the King II and III reports, the official guideline for corporate governance in South Africa.

IT outsourcing has, all in all, become an emerging area of business for telecommunication service providers (vendors, network operators, ISPs, and system integrators) in Africa. With the global and African economy recovering in the next one to two years, IT outsourcing will transition from a “nice to have” to an essential part of the business environment. However, continuous innovation in new outsourcing services is critical, with the advancement of communication and IT technologies in the market. Hence, the question of whether IT outsourcing is a short-term transitive or a long-term sustainable business depends on how long companies are willing to pay someone else to tie their shoe laces.
 

Devott Publications
The Selection of the TOP Global Outsourcing Destinations – China TOP 15 (TGOD China TOP 15) Ended and Its Rankings and Research Reports are Now Available Worldwide