Middlesourcing is a term that helps to illustrate how firms in Singapore and SE Asia can benefit from the technology waves in China and India, and create a new niche area for business. As a regional hub (with similar time zones with that of India and China) with a wired-up populace and strong e-government infrastructure, Singapore can leverage its position as a middleman and become specialists in managing outsourcing relationships that have started in India and China. SDA Asia's Dilip Thomas spoke to Graham Sowden to better understand this new buzzword in IT business.
SDA: Can you explain what you mean by Middle-sourcing?
Graham Sowden: Mercury is seeing a trend in “middlesourcing”. Middlesourcing is helping companies in the west manage their IT outsourcing contracts with less developed countries in the region such as India and China. And vice versa, by helping countries like India and China manage their outsourcing contracts with large organisations in the west.
SDA: What will be the role of middle-sourcers in the enterprise’s value chain?
Graham Sowden: At a microeconomic or enterprise level, competition in countries like Singapore being one of the most open markets globally is intense. With little or no impediments to global competition, middlesourcing then becomes a key differentiation to deliver a consistent, high quality end-user experience. And the ICT industry in Singapore is increasingly being challenged in this regard as costs of doing business and investing in Singapore is higher than the rest of the developing countries in the region.
Middlesourcing allows companies to leapfrog the outsourcing value chain and come up tops by managing the business process work, infrastructure and testing work that have already been outsourced to cheaper players.
SDA: If outsourcing was properly planned, executed, and controlled, surely companies would not find managing the relationship so burdensome. Is middle-sourcing, then, accepting that outsourcing has not delivered?
Graham Sowden: CIOs often complain about the relationship aspects of outsourcing and the time it takes to manage outsourcing contracts. Middlesourcing will help these companies manage their outsourcing costs and realise their return on investments in outsourcing even faster. It will also help lower the total cost of ownership by outsourcing the manpower to manage the outsourcer, thus allowing companies to focus on their core competencies.
SDA: Organizational culture tends to be unique and therefore aligning the outsourced partner’s culture to one’s own to the extent that they are managing your customers or a part of your business is in itself a key challenge to enterprises. In this context, won’t middle-sourcing make this more challenging and also introduce one more variable in the process?
Graham Sowden: Contrary to having to manage an additional third party in middlesourcing, the outsourcer can benefit from having greater visibility and control over their IT operations and current outsourcing contracts. Enterprises today are finding it costly to manage change, projects and quality, in addition to ensuring business availability. Here is where the ‘middleman’ comes in to ensure that projects are delivered on time, quality issues are resolved, and business uptime is maintained.
Middlesourcing is a critical capability for the IT executive to manage what has been outsourced eg: application management, software development, business process outsourcing because:
- Failure of applications means failure of the business (downtime costs average US / hour (Gartner)
- 80% of IT downtime caused by application failure and operational process mistakes (Gartner)
In these cases, visibility and control remain key issues:
- Traditional tools are focused on system and infrastructure management rather than the applications and services that IT must deliver
- Bottom-up view does not reflect status of critical business processes
- Lack of real-time visibility means that IT cannot prioritize application problems based on business impact.
Effective middlesourcing gives a company that has outsourced some of its IT operations:
- Real-time visibility into the status of critical automated business processes - Problems found/ fixed before customers experience problems
- Mitigate the business risk of application or infrastructure changes - Map apps to infrastructure streamline resolution process
- Prioritize the resolution of application issues based on impact
At Mercury, our clients are using Mercury Business Availability Center which is an end-to-end, business-centric approach to application management — enabling organizations to measure, and manage application, system, and infrastructure performance and availability according to end-user quality of experience, service level contracts or agreements, and business goals.
SDA: With enterprises increasingly talking about using technology for business integration across business entities, would technology be an alternative to middle-sourcing?
Graham Sowden: Enterprises need an infrastructure, operations, expertise, and on-going mentoring tailored to the needs of their business. Besides that, they need to look for a solution that also helps customers minimize risk as they move from a managed service deployment to eventual in-house deployment with ongoing assistance.
With the implementation of effective Application Management, it will enable a real-time visibility into the status of critical automated business processes and problems found and fixed before customers experience problems. By mitigating the business risk of application or infrastructure changes, it will be able to map applications to infrastructure streamline resolution process . Enterprises can then prioritize the resolution of application issues based on impact.
SDA: Does that mean that now companies have to manage the middle sourcer instead of the end outsourcing partner?
Graham Sowden: Many companies often outsource the lower-value work, such as software development. When you outsource software development and you don't ensure that the outsourcer has a good quality assurance and application testing process in place, problems occur.
These problems are reflected in Gartner's findings, which state that 80 per cent of IT failure stems from application failures, where half of these come from people and process issues related to infrastructure changes, configuration and problem management, while the other half include failures caused by bugs and ineffective application change-management processes.
SDA: What core competencies are middle sourcing companies going to offer their clients?
Graham Sowden: Traditionally, what is being outsourced are the business process, infrastructure management and software development functions. But as we speak with CIOs in the region today, they are also looking to outsource IT operations or management. Companies like Mercury are still in an early-adopter phase and greater interest can be built.
A recent example is NHN, Korea's largest online gaming provider, who outsourced its network infrastructure to a major IT services company but roped in Mercury to manage its outsourcer. Instead of establishing service level agreements around traditional metrics such as uptime, reliability and throughput, NHN worked with Mercury to measure customer experiences during key processes.
SDA: Is the plan for Singaporean companies to manage outsourcing in other countries in the region such as Asia and China? Geographical distance has been known to add complexity to managing people and process even within the same organization. Doesn’t this have implications for middle-sourcing?
Graham Sowden: As a regional hub, Singapore must leverage its position as middleman. For example, while applications are being developed in China, the IT team in Singapore has the expertise to oversee and manage the performance, availability and quality of the applications. Thus, Singapore has major opportunity to oversee and manage key SLAs and drive the business outcomes for IT operations outsourced to China and India.
You can get the entire scoop on Middlesourcing in the Spotlight section of the upcoming Issue (Volume 08) of SDA Asia Magazine. Subscribe Now! |
