Atos, one of the leading outsourcing companies, announces a new approach to transform the traditional outsourcing approach. How do I decrease costs, yet increase innovation? The specialist knowledge we have built up as the Worldwide Partner of the IOC mirrors the intensive, industry-specific knowledge that we will bring to every outsourcing relationship. What Atos has been doing for the Olympic and Paralympic Games, we can do for your organization, bringing the same winning spirit. This knowledge, coupled with Atos’ vision of the firm of the future, can give you an unsurpassed advantage as you focus on your core competitive activities

1. T
White paper
transforming
the future
of outsourcing
Your business technologists. Powering progress

2. Introduction
The increased competitive nature of the IT Outsourcing has been widely acknowledged as
a source of cost reduction as well as business
Fig. 1. Top Priorities in Outsourcing2: Source Gartner [16] This raises new challenges for IT service
providers where there is a requirement to
agility. Outsourcing is, and will remain, one of deliver value beyond just cost savings in the
outsourcing market in the current economic the main development lines for Atos; Atos is
Reduce cost, reduce assets or improve cash flow
(economic, financial conditions) commodity services they provide. Increasingly,
recognized as one of the top three IT to build sustainable added value, industry-
climate combined with the emergence of outsourcing services providers in Western Gain access to resources and capability specific business knowledge will be required to
Europe. Although broadly used, outsourcing is understand and anticipate clients’ current and
cloud services will sooner or later present a not a panacea. A 2009 survey of chief financial
officers of businesses that outsource their IT
Improve flexibility
future directions. This knowledge will be used to
customize existing services or create new ones
Improve scalability
real threat to traditional outsourcing models. services by outsourcing consultancy Cognizant
revealed that “78 percent of CFOs believed that
with a direct impact on the customers’ core
businesses. These general trends also impact
Improve agility/reduce processing cycles (speed)
the value for money they received from IT Atos visions and expectations. Atos’ 2009 and
This paper proposes two parallel and complementary opportunities for the evolution of outsourcing was ‘unclear’, while only 38 percent Reduce business risk 2010 half-year reports [40][41] acknowledge
outsourcing services. The first strategy focuses on evolving transformational outsourcing were confident of the ability of their the following facts for IT outsourcing:
strategies whereby Atos products and services focus directly on contributing value to its organization’s CIO to communicate the benefits 0 20 40 60 80 100 Cost reduction and skill shortages remain
customers’ core business processes. The second proposes that Atos advances its current of their particular outsourcing engagement to major drivers for outsourcing.
the business”1. 2009 2010 Percentage of Respondents
cloud offerings by developing sector-specific clouds capitalizing on the existing knowledge Outsourcing tends to grow when the
the company has gained from the many years it has been collaborating closely with economy is weak; however, outsourcing
customers in specific industrial sectors. In general, traditional outsourcing models are
increasingly coming under pressure due to the growth stalls in
following factors: Change in pricing models: times of uncertainty. This raises expectations
Over the last few decades, outsourcing - the process whereby companies or individuals contract out for IT outsourcing and BPO in Europe.
a function - previously performed in-house to an external provider has become a common practice While traditional outsourcing contracts are primarily based on fixed-pricing and used-time-and-
Economic downfall: material models, the current trend is a push for more commercial flexibility, leaning towards usage- However, decision cycles are likely to be on
both in people’s personal lives and the business environment. Personal outsourced services range hold for buyers and they will be looking for
from supplying electricity and water to more sophisticated services that improve work-life balance, The economic crisis hasresulted in greater based pricing models or at least hybrid pricing where both a subscription fee and pay-as-you-use
charges are incurred. faster ROI and increased flexibility.
such as online shopping. Equally in business environments, outsourcing is used as a means of scrutiny of the value delivered by outsourcing.
optimizing companies’ resources to allow them to focus on core business functions while relying On average, the number of deals has reduced Re-negotiation of existing contracts to cut
on third parties for non-strategic and commoditized services. and they have more focus on cost savings. Cloud emergence: costs and increase flexibility may provide
This situation has lead to a very uncertain and While the adoption of cloud delivery models may take longer than anticipated, there is no denying opportunities for consolidating scope and
unstable market. that the emergence of cloud services was a paradigm shift that shook the foundations of the IT increasing the length of contracts.
industry, and that its continued uptake and development is increasingly shaping the sector. For Protecting the existing customer base will be
In 2009, customers asked their IT services several decades, customers and providers have relied on stable delivery approaches, customized critical in 2010.
providers to reduce their prices between architectures and solutions and traditional commercial models, with outsourcing and offshoring at A
significant growth of migration to virtual
fivepercent and 20 percent [22] as a direct the heart of their offerings. environments is expected in order to offer
resultof the economic downturn and the need The significance of the cloud model lies not just in changing demands from customers, but in new flexibility and reduce costs.
to identify potential savings along the entire market entrants. The hype surrounding the cloud has facilitated the flow of investment capital to Offshore IT outsourcing will increase.
value chain. This puts more pressure on IT new entrants (although admittedly so far predomi nantly in the SaaS area) and has encouraged
service providers to reduce their own internal Most bids will present environmental
existing companies to invest in this market (Amazon, Google, Microsoft, for example).
costs in order to remain competitive and exigency development.
According to Gartner, these traditional IT service offerings still represent a significant market share,
maintain margins. Common solutions here Growth of interest in sourcing management
the top 10 service providers account for 27 percent of the datacenter and utility outsourcing market.
are offshoring, industrialization of services and and governance.
But, while demand is somewhat steadying, predictions for cloud-based offerings look promising. For
automation. The market demands service providers have
example, global Software as a Service (SaaS) revenues within the enterprise application software
market are forecast to surpass $8.5 billion in 2010, up 14.1 percent from 2009. The expectation is that industry knowledge, flexibility and bring
In parallel, IT service providers are experiencing innovation.
total SaaS revenue will jump from just over 10 percent of the combined markets in 2009 to more
lower demand because of budget declines,
than 16 percent for 2014 [22]. I
n a difficult economical environment, request
market uncertainties and delays in contract
signings caused by the economic crisis. All for services to transform and operate a major
Need for value-added services: part of an information system are expected to
together, this generates a hyper-competitive
environment where providers are competing While IT service providers are being squeezed by both the current economic downturn and the continue growing.
on the basis of cost and the degree of financial threat of cloud services, customers are also forced to rationalize their value chains, simplify their I
ndustry domain expertise will be capital basis
and service quality risks they are willing to take, business processes and enhance efficiency in the face of increasing competition in their particular for selecting the right outsourcing partner.
leading to a zero sum game. markets. They continue to look for strategic partners that support them in optimizing their Some analysts believe the outsourcing market
operations and business processes in both the back and front office, where the significance and will soon fragment into players focused on
value of this external provision far exceeds value delivered by traditional outsourcing. domain expertise. innovative solution.3
They expect financial improvements (reduced costs and higher profit margins), innovation
(competitive advantage by doing things differently from the competition), efficiency gains and
improved agility to help them transform and grow their businesses. Figure 1 shows the results of a
survey carried out by Gartner in 2010 highlighting the key drivers for customers to outsource [16].
It reflects that, whilst cost reduction remains the principal objective, increasingly customers are
looking for access to resources and capabilities alongside improved flexibility and scalability.
1 http://www.information-age.com/channels/it-services/features/1261003/outsource-evolution.thtml
2 Transforming the future of outsourcing Transforming the future of outsourcing 3

3. Impact on business
This section presents IT services in new Business services currently count as one of
the largest sectors in the European economy
The OECD [17] recognizes the emergence of
this new sector as the main driver of the growth
– articipative community platforms, such
P
asWikipedia, of which few generate
Future of internet:
economic sectors and have experienced a remarkable growth of broadband subscribers from 68 million in significant revenues and most content internet of services concept
the three major both in terms of employment and added 2003 to the 251 million in 2008. The growing is voluntary.
Services are a key sector in developed value. In the EU, they provide the 8.5 percent number of users has stimulated the creation of The Internet is now a critical infrastructure for
trends that have the economies. Industries delivering intellectual
content, support, utility, expertise and
of total employment and 15.3 percent of added new content. Besides, mobile broadband
– nternet publishing and broadcasting
I
platforms, such as YouTube, do not the whole of society in developed countries
with more than 1 billion users worldwide. Today,
value. They also contribute to improving the is also beginning to boost content creation themselves create or own the content
potential to influence information have significantly grown over the
last three decades, becoming the largest part
competitive performance of organizations in
almost all sectors of the economy in developed
and demand. being published or broadcasted. more than the academic network was originally
designed for, the Internet is used as a business
the outsourcing of most industrialized economies [9]. According
to The Organization for Economic Cooperation
countries. Business Services’ application of ICT
is encouraged by many factors such as:
An increasing share of the content industry’s
revenues is produced by products delivered
This trend has been enabled and driven by the platform and has become part of daily life.
It is expected that with the development of
interaction of technology, global businesses
landscape in and Development (OECD), the service
sector accounts for over 70 percent of total
Applicability: The intangible nature of many
business services makes them suitable for
over the Internet, but with market differences
across sectors. Advertising is the biggest online
and social change. Its effects go beyond
products, reshaping other economic sectors
wireless technologies, the number of users will
grow to 4 billion in a few years. As the number
the future. employment and added value in the European
Union [10].
digital delivery. market, with revenues of over $30 billion in
2007 and annual growth of 30 percent. One
such as telecommunications, financial services,
newspapers, books resellers and publishers, and,
of users, providers, services and connected
devices grows, the current Internet is going
Demand: To meet new customer demands
sixth of total computer, videogame and music to face problems, including but not limited to
and expectations. in the future, it has the potential to affect many
Business services entail a broad variety of revenues correspond to this sector. In particular, others. Above everything else, it is changing scalability, security and address space limitation.
services that are provided to organizations Quality: To improve the quality and depth of the online-games market was estimated at $ 11 the way that people communicate and interact. It is expected that the infrastructure of the
rather than to individuals. They cover a broad customer relations. billion in 2008, representing some 25 percent of The trend, known as Hyper-Digitalization by Internet will continually evolve to support
spectrum of services that are mainly traded in E
xpansion: To enhance market reach and
the worldwide games market. The development some business analysts, is going to create new services, trends and businesses. Low
business-to-business transactions. Business- expand market share. of user content is rapidly increasing, although growth in demand for many IT services, such entry barriers for provisioning, brokering and
services sectors consist of two broad groups; still not completely viable economically [19]: as infrastructure, communications, security, consumption of services are crucial for large
Efficiency: To increase operating efficiency
the operational services that supply relatively privacy, distribution of content, storage and and small enterprises alike, acting as service
and gain economies of scale and scope. Social-networking platforms: online
standardized services and the knowledge- management. The sources of this demand are providers and trying to access a worldwide
intensive services that generally produce client- Cost reduction: To improve and expand low-
advertising is seen as the main future source market of potential service users. A broadened
of revenue for social-networking platforms anticipated to be twofold:
specific services with high knowledge content. cost production and delivery options. concept of a global and open Service Delivery
The wider group of knowledge-producer such as Facebook or Twitter. Nevertheless, Platform is required for the Future of Internet
it is still unclear whether revenues will be On
the one hand, existing business services
services includes business services tackling ICT facilitates the introduction of new business and Internet of Services vision, going beyond
sufficient to finance the increasing number of providers adjusting to the new panorama by
sectors like transport, logistics, construction, models, development of new applications, the client-server model for service delivery to
participants on these platforms and whether automating, digitalizing and moving online.
wholesale trade, banking, insurance and improvement and reformulation of business support rich mechanisms of global service
users will be receptive to advertising on these The growth potential will lead traditional
telecommunications. These intermediary processes, enhancement of customer services supply, where third parties have the capability
platforms. Although user numbers went businesses to consider new ideas in IT
services apply to a broad spectrum of and increased efficiency throughout the whole to aggregate services, act as intermediaries
up sharply last year, the social-networking and services.
application domains, ranging from software value chain. for the service delivery and provide innovative
development to translation services and from industry‘s revenues in America, its biggest O
n the other hand, newcomers to the market channels for consuming services. To realize this
equipment provisioning to legal consultancy. But, beyond this, over the last two decades, a advertising market, represented only $ 1.2 will emerge providing innovative services vision, an open platform for marketable, able-
new ‘sector’ of the economy has developed billion in 2009, according to market-research over the Internet which will represent new to-be-composed, value-added services on the
that neither provides traditional services nor firm eMarketer. However, online audience opportunities for IT service providers. Internet is required. Such a platform will need
traditional goods, rather pure digital assets. measurement firm Comscore found that to build upon and extend Web 2.0 concepts to
These assets consist in content of all kinds; more than 770 million people worldwide allow for large-scale, community-driven service
entertainment, applications, education, advice visited a social-networking site in July 2009, innovation and engineering, global repositories
and services for customers that are consumed which is an increase of 18 percent from the for value added services and semantic support
mainly by individuals, but also affect traditional previous year. The global average time spent to enhance and enable automatic composition
business services delivery models. on social networks was 22.4 hours per user in of value-added services. This will enhance
August 2009. This represents an enormous reusability of services and allow reasoning
potential that has yet to be fully exploited in to derive further knowledge. Legal, security,
two areas: logistics business and technical aspects must
be simultaneously addressed for an integral
approach to the Internet of Services.
This is a long-term vision, but it is already
starting to happen. Apple’s Apps Store Model
is the perfect example of it. The combination
of a good device, a well-designed, integrated
and easy-to-use marketplace, together with
an effective payment system based on
micro-transactions, and a broad selection of
interesting content, delivers a very effective
distribution channel for services provided by
IT service providers, as well as individuals and
SMEs. AppStore is a new model for the delivery
of digital services and a clear example of
how new ecosystems and service models
are emerging.
4 Transforming the future of outsourcing Transforming the future of outsourcing 5

4. Fig. 2. Service
The following have been identified as potential benefits of cloud computing: Customers started with fully-customized,
Generic Value internally-owned and operated services,
Reduction of capital investment: Given its outsourcing nature, cloud converts IT into an
Network for Aggregator operational expense, paying per use. Also, in the case of infrastructure provisioning, the risk of followed by the external provision of IT-services
Cloud Computing. through outsourcing activities and are finally
Source [38]
(Broker) overprovisioning or under-provisioning in the datacenter is reduced from a customer perspective.
embracing the emergence of cloud-based
Scalability on demand: The elastic nature of cloud computing avoids forecasting on compute
Service services whereby they buy specific horizontal
€ € capacity or demand; it can be swiftly and on-demand adapted to business needs, with no need for
IT functionality (computing, storage and
over or under-provisioning.
Service € Service applications) as a commodity-like service or
Lower operating costs: Cloud providers achieve economies of scale in their shared infrastructure
fully functional standardized services (payment
management due to greater resource sharing, greater levels of architectural standardization and services, sales, CRM, etc.).
Service operation, as well as a better consolidation. These benefits are passed along to the customers of
these services. These include significantly reduced prices in comparison with traditional offerings.
Customer Platform Service The fact that the on-demand nature of cloud offerings results in a linearly-priced business model
Other visions, such as that provided by The
Economist in its special report on Corporate
€ (Catalogue / Market) Provider must also be taken into account as use increases cost scales directly, but without increases in IT[3] go further, suggesting that the emergence
management complexity or additional overhead. of cloud computing could change businesses
Metered usage and billing: Different to many outsourcing models based on a fee or a flat
and the economy. If IT services really allow
€ rate, cloud is a transparent pay-per-use pricing model. It is not a recurring bill; it is based on real companies to become more modular and
Resources
Resources consumption of the service, allowing fine granular IT cost assessment. flexible, this should foster further specialization.
It could become even easier to outsource
€ business processes, or at least those parts
Forrester, in its report ‘Is Cloud Computing ready for the Enterprise?’[4] identified the following
€ typologies of users for cloud: of the business that do not constitute a
Consulting
Integrated competitive advantage, distinguishing between
Start-ups: Given cloud’scheap infrastructure and the low investment required: web-based
€ data the core processes and the context. This would
businesses, SaaS, collaboration services, widget providers, mobile services, social networking, etc.
processes/ also mean that companies will rely more on
applications Entertainment industry, mainly gaming and entertainment providers: Due to their need for
Integrator Infrastructure highlyscalable and temporary systems.
services provided by others, increasingly
forming ‘process’ networks, a term for loosely-
Provider Small businesses: For online businesses, online presence, collaboration and enterprise integration.
connected groupings of specialized firms.
Enterprises: Used as a quick and cheap experimentation facility by RD projects, quick
Both trends could result in ‘huge clouds’ that
€ provide basic services for a particular sector.
promotions, widgets, online collaboration, partner integration, social networking and new
business ventures. On top of these systems, many specialized and
interconnected firms could construct their
€
Consulting The wider adoption of the cloud model in enterprise environments, despite of all the previously- own services.
(Research) Consulting identified benefits, still faces various challenges with no sufficient mature solutions:
Security: Data security is the principal concern in the adoption of cloud services. Many users only
trust systems they have physical control over; systems with corporate firewalls and/or with known This represents
processes and audits. To outsource to any other model is not perceived as a secure model.
Regulations: Some regulations require of tracking, logging and auditing of enterprise data that
an emerging
Cloud Services of attention is now on what the service offers
rather that in how it is implemented or hosted,
Platform as a Service[7] (PaaS) is the set of
welldefined APIs that a cloud provider offers
for the moment, are not offered by cloud providers.
opportunity for
Reliability: Nearly all public cloud providers have suffered episodes of service-level failure or
changing their focus from buying tools to developers to implement applications in the
Cloud computing first emerged as Infrastructure
as a Service (IaaS), with Amazon’s EC Services enable a functionality, towards the contracting cloud provider’s environment. PaaS also refers
unavailability. This severely concerns enterprises that prefer not to outsource services where they
lose control.
service providers,
of a third party to deliver this functionality in to the provisioning of a development and
(EC2 and EC3) as its de facto figureheads. The
evolution of the term is moving on to a more a elastic and on-demand way in a pay-per-use
model. Of course, it is not new, Grid, SaaS and
testing environment via cloud for a group
of developers.
Service Level Agreement (SLAs) limitations: SLAs provided by current public cloud providers
are too limited and not adequate for enterprise environments.
such as Atos, that
generic approach becoming an alternative
delivery and acquisition model in which Utility models were already doing it, but it is a
clearly a different approach to the classical on-
I
nfrastructure as a Service (IaaS)[6] is the
Existing investments: Already-made investments mean that many companies are reluctant to
abandon current systems and outsource to cloud providers.
together with a deep
anything and everything can be offered ‘as a delivery of computer infrastructure (CPU,
Service’. Cloud computing is perceived as the premise, license based models. storage, backup and network) as a service.
According to Gartner [2], a continuing trend toward IT industrialization has grown in popularity over
knowledge of vertical
latest attempt or a general purpose IT utility that
is accessible by anyone, from anywhere at any
time as a Service.
Cloud computing and its underlying ‘Everything
as a service’ terminology refers to elastic
In addition to this layered vision, based on
the type of products offered, a more-business
the past 15 years. IT services delivered via hardware, software and people have become repeatable
and usable by a wide range of customers and service providers. This is for several reasons; the
sectors, have the
Cloud computing is the convergence of several
Internet provision of X resources or capabilities.
Although there are others, the most-known X-as-
oriented classification can be provided by
analyzing the different flows of services and
standardization and commoditization of technologies; virtualization and the rise of service-oriented
software architectures; and most importantly the dramatic growth in popularity of the use of the technical means
trends from the past years and joins a set of
technologies and concepts that have been
a-Service terms are:
Software-as a Service[5] (SaaS) is a model of
payments in the form of a generic value
network for cloud computing (Figure 2).
Internet. These things together constitute a new opportunity to shape the relationship between
IT services sellers and vendors, moving from license-based, on-premise models, long dominant necessary to make
in the IT industry, to ‘elastic’ models represented by cloud computing. Although this is not a
emerging over time: Software as a Service
(SaaS), Grid computing, Virtualization, Utility
software deployment whereby an application
is licensed for use as a service provided to completely new phenomenon; utility computing, Software as a Service and Application Service these sector-specific
Providers (ASPs) had their turn, this is building the foundation for a move from an Internet seen as
computing and Hosting. Moreover, it is a
change in IT users’ behavior; a user’s centre
customers on demand.
a ‘communications channel’ to an approach based on ‘the deliberate delivery of services’ over the
Internet. Looking once more at outsourcing strategies, the shift to cloud services can be considered
clouds a reality.
more evolutionary than revolutionary, being part of an externalization tendency that has been
taking place over the last decades.
6 Transforming the future of outsourcing Transforming the future of outsourcing 7