Transitioning to Next-Generation Outsourcing: Changing Investment Requirements for Ensuring Success in a World of Cloud-Based Services

Transitioning to Next-Generation Outsourcing: Changing Investment Requirements for Ensuring Success in a World of Cloud-Based ServicesThis IDC study provides an overview of IDC's view of key building blocks that providers of traditional outsourced-managed services (e.g., labor oriented) need to invest in as they transition to the next-generation outsourced business model referred to as cloud services. Using a combination of recent feedback from buyer studies, service provider financials including the Securities and Exchange Commission (SEC), and ongoing research on the topic of cloud services, this study provides a set of detailed assessments on the future end-state structure and ecosystem of a provider of outsourced-managed cloud services, the need for a shift in market penetration strategies, the breadth of risks across providers and buyers that are shaping the structure of the provider, and a financial contrast between traditional and cloud services business models. Finally, this study offers an executive summary and essential guidance on critical investments that providers need to make to ensure success, including defining the end-state structure of a "pure-play" cloud service provider and ecosystem, creating a framework to determine the pace of transition, establishing and monitoring critical business and performance metrics, defining an optimal market penetration strategy, understanding total risks and risk tolerance from service provider to buyer to government, and creating a road map of critical investments that delineate roles and responsibilities between what to own and where to partner."Providers of outsourced-managed services using traditional IT services approaches (e.g., labor oriented) are under increasing pressure to transition their business model to the next-generation outsourcing model involving cloud-based service delivery and consumption," says David Tapper, VP of Outsourcing, Managed, and Offshore Services at IDC. "Success for players competing in the world of traditional outsourced-managed services and needing to transition to a cloud-based outsourced-managed services business will require them to define the end-state structure of a pure-play cloud service provider and ecosystem, develop a framework to determine the pace of transition, establish and monitor critical business and performance metrics, define the optimal market penetration strategy, understand total risks and risk tolerance from service provider to buyer to government, and create a road map of critical investments that delineate roles and responsibilities between what to own and operate, and where to partner."


IDC Opinion
In This Study
Executive Summary
Define the End-State Structure of a Pure-Play Cloud Service Provider and Ecosystem
Create a Framework to Determine Pace of Change: Evolutionary Versus Revolutionary
Establish Critical Business and Performance Metrics
Define an Optimal Market Penetration Strategy
Understand Total Risks and Risk Tolerance: From Provider to Buyer to Government
Create a Road Map of Critical Investments: Owning Versus Partnering
Situation Overview
An Event-Driven World
Case of Volkswagen and Chipotle: Information Proliferation
Enterprise Ecosystem View: Holistic Orchestration
Cloud Provider Ecosystem and Business Model: Building to the End State
Business Model of a Cloud Service Provider: The Auto Industry at Retailer Prices Delivered as a Utility Service
Move to Specialization
Market Penetration and Risk Profile
Market Penetration Investment Model: Market Versus Firm
Risks
The Economic Factor: Regulation and Standardization
The Market Factor: Litigation and Remuneration
Financial Contrast: Traditional Versus Cloud Services Business Models
Cloud Services Versus Traditional IT Services: Comparative Metrics
Productivity and ROI Metrics
Productivity: Revenue per Employee
ROI: Revenue per Client
Performance Measures
COS, Gross Margins, and SG&A
Substitution Rates: Traditional for Cloud Services
Future Outlook
Investments
Sales and Marketing
Direct and Indirect Channels
Franchise Channels
Online Business Services
Assets: Owning Versus "Manufacturing"
Factors Shaping Ownership Versus Manufacturing of Assets
Value Chain of Service Delivery: Linking Quality of Service to Assets
Scalability: Capacity
Responsiveness
Consistency and Accessibility: Integrated Digital Services Supply Chain
Flexibility: Agnostic
Speed: DevOps
Availability and Continuity: Redundancy
Portability: Localization
The Puzzle and the Framework
The Puzzle: From Parts to Cars
The Framework
Essential Guidance
Learn More
Related Research
Synopsis

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