Think back 20 years ago when we were talking about the promise of delivering low-cost, reliable IT and business services using a follow-the-sun model. Many said it was not feasible. Then recall discussions from ten years ago about on-demand access to infrastructure and software, no matter where it was needed across the globe – and only paying for what you use. Unthinkable!
Both are here today. The global delivery model is now the norm within the $135 billion IT services market, and cloud is so embedded in the way we work we don’t give it a second thought. What’s amazing is that, given the unprecedented level of disruption COVID-19 has wreaked across the planet, global delivery and cloud technology are working at all.
As we discussed on the most recent ISG Index call, IT and business services have stabilized over the past several weeks. Customer calls are being answered, transactions are being processed and IT systems are being monitored and managed. And, in many cases, they are not just stabilized – they’re running remarkably well. When we asked over 120 ISG advisors two weeks into the crisis for their perspective on the services their clients were receiving from their most important providers, the data surprised us. We asked them to rate services on a scale from 1 to 5, with 5 being no change in services due to the pandemic, and 1 being unable to deliver services. The average score was 3.9.
This is happening with upwards of 80 percent of ITO and BPO staff working remotely, given lockdowns and quarantines in countries like India and the Philippines. That’s hundreds of thousands of people working from home – overnight. This means that service providers needed to buy and secure hundreds of thousands of laptops, ensure connectivity and train employees to work remotely. And those employees are relying on the cloud to do the work for which their clients have contracted. Did you know that providers are standing up virtual call centers for their clients in 48 hours? Only cloud makes that possible.
Are services being delivered at the same levels they were pre-COVID-19? Absolutely not. We estimate that productivity among IT and business services providers has declined about 20 percent, based on our discussions with both enterprise clients and service providers. It’s going to be a long slog to claw five to ten percent of this back.
The other ten percent is attainable, but it will involve enterprise and provider leaders – and individual employees – to come to terms with a new way of working and embrace it as an operating model. Even when shelter-in-place orders are lifted across the globe, there will be people who won’t go back to working the old way. We have seen teams and companies already bringing new ways of collaborating and thinking to their jobs and finding surprising value and innovation in what is turning out to be, paradoxically, a more-connected way of working.
What is the future of company-owned offshore captive operations? As we talked about on the Index, smaller offshore captive centers are struggling. They just don’t have the scale or logistics expertise to shift hundreds or thousands of employees, who are processing millions of transactions, to a work-from-home model. This makes the providers’ loss of just 20 percent productivity even more impressive.
That’s why we believe we’ll see many enterprises looking to monetize their captives in the coming months – as a way to infuse cash, initiate a shift to service providers with a global delivery model and get access to lots of cloud talent – to beef up operational resiliency in the long run.
Steve Hall, Prashant Kelker and I will be discussing the topic of business resiliency – and the role providers play in it – on an upcoming webinar Resiliency and the Road to Recovery. I hope you will join us!
About the author
Stanton Jones
Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.
