Do you see a narrow view of the application of cloud concepts by some individuals? Is it a case of not seeing the forest for the trees, or something else??

Automation is one of the ways that businesses can use the abundance of computing capabilities to maximize value. The Horses for Sources blog had a post about the automation of BPO efforts titled: Greetings from Robotistan, outsourcing’s cheapest new destination.

The post made the case for replacing people in processes with automation – automation in services is something I’ve mentioned many times before.

What the HfS post didn’t cover is the role that people can and must play even in a highly automated environment. Automation is good at handling situations that are fairly well understood. What agent techniques are not good at is knowing what to do when there is not sufficient information or the patterns identified are not well understood. This is a role where humans excel.

When performing automation it can be as important identifying what is unusual and how to bring attention to the situation. Human augmentation of automation is as important as the automation itself. Effectively bringing people into the situation to make decisions is an example of scarce resource optimization that is so important in a world of IT abundance. The people involved will have to be knowledge workers who are ready for a dynamic environment that addresses anomalies and be able to describe how their involvement can be replaced by automation in the future.

Last week I posted on multi-sourcing and its implications on IT cost that got me thinking about a post in CIO titled: U.S. Beats India for IT Outsourcing Innovation and Understanding that reinforced my frustration with those who equate outsourcing with off-shoring. Yes, there is a geographic connection, but let’s not make it tighter than it actually is.

For over a decade the organization that is currently HP ES has been using the concept of best-shore to ensure that the right people with the right skills are applied to the problem at hand. The broad brush labels used in this CIO article just do everyone a disservice, in my opinion. The issue of innovation and outsourcing has been around for a long time.

People are not fungible – they bring a unique set of skills, resources and capabilities. The offerings in the services industry (beyond the most basic IaaS) are about selling people’s capabilities, especially to larger organizations that want solutions tailored to meet their needs. That is part of where the innovation in the services space comes from – doing custom work in a standard way. The relationship has to be structured to make innovation happen.

The use of other organizations to extend the enterprise is a strategic decision that needs to be treated as such. It is not just about cost cutting. It is about meeting the needs of the organization for quality, security… , as well as cost effectiveness, using whatever means are necessary. As organizations move their service needs up the value chain into more personalized/consumer focused services, these quality issues are paramount, since a confused or frustrated customer is typically not a return customer. The focus needs to be on quality. The geographic location is just a distraction, if the quality is the same.

Gartner recently put out a video describing some of the forces that are reshaping the fundamentals of how IT services providers deliver & sell and how buyers consume. Delivery models and methods are coming that will improve the quality, predictability and value of service offerings. It may be that greater physical "face time" improves the relationship more than just the cost benifits, regardless of where the work gets done.

Over the years I have worked on relationships with a number of very large organizations. Some had service providers “cubby holed” into specific disciplines. Vendor X is the hosting provider or vendor Y does the mainframe development. Some consumers had well defined criteria to move vendors into a new category of services, while others were more of a free-for-all, where they had RFPs for everything and let the chips fall where they may.

One thing was clear, the more vendors involved the more “policemen” were generally required to keep order and the more build-up of administrative overhead. I’ve seen it happen over and over that a large outsourcing deal will go into effect. All but 10 or 20 people will move over to the outsourcer during the transition phase. After a few years, the organization’s administrative organization will grow until they start taking back in-house or bidding out work again, eventually having as many dedicated workers as the suppliers that supposed to be doing the work. Watchers watching the watchers. To me this is a symptom of poor relationship management skills both for the supplier and the consuming organization.

The HP Technical Services (TS) organization recently put out a post titled: A single service provider – do the math – much more than just administrative efficiencies, where they discuss HP’s ability to perform third party management. This 3rd party management function is becoming essential for businesses in the future (especially in this cloudy age), as a wider range of services (not just in IT) need to be coordinated and incorporated to deliver value in a predictable fashion. The industry cure today seems to be having more deals with more vendors that are shorter in duration, essentially surrendering the strategic relationship and hoping that if the deals are small enough they will do less harm.

Lock-in is a problem, and it could be viewed as a relationship problem as well. Express the concerns early.

The TS post focuses on coordination of efforts within a particular domain. Cross-domain coordination can be just as important too – for example: we see organizations traditionally thought of as manufacturers (for example) starting to outsource manufacturing.

This 3rd party management skill is something where consultants can help and the function can be outsourced as well, and probably should be if the internal team has not yet developed the skills. It is also a core skill for service providers, since it is an additional area impacting outsourcing and services.

I was looking at a Horses for Sources blog post titled: It’s a miracle we’re yet to see any BPO/ITO security disasters that focused on the effect of having the Chief Security Officer show up at an outsourcing meeting and it got me wondering why the security officer would be viewed as such an innovation barrier.

The constraints of security could actually provide the framework to focus innovation. There is no doubt that security is a business expectation. It should not be a choice between having security and having innovative solutions, it is about having both. For example a well-designed single sign-on solution improves the security as well as the ease of use. Standards like security allow organization to focus their creativity.

Sure the security requirements may be viewed as “onerous” but it takes effort for everyone to work together and develop common goals and reaching an understanding of that “third right answer” that no one could have come up with on their own.

The post points out quite effectively that security can’t be bolted on but must be built in. If there is anything we learned from the 1990s, it is that perimeter based security just doesn’t work. As outsourcing and cloud contracts are written, the security needs of the enterprise need to be thought out and documented – not ignored.