Software specialist and seasoned entrepreneur Jesse Lee discusses cloud migration, vendor outsourcing, and why better supplier-management tools and processes are essential to sustaining competitive advantage.
“More and more companies are shipping more and more operations to cloud service providers, or to other external solution providers,” starts Jesse. “For one thing, external services are turning into more of a commodity at and below a certain layer in the technology stack. Moreover, SaaS solution providers bring rich innovation plus high reliability, promising this or that nice new advantage that is worth the change and risk.”
“In the Enterprise-IT market today, the usual justifications for this trend are two-fold. They go like this:
“’One, we as a business should focus on our core business and stop reinventing a wheel that others offer as a great service and at scale.
“Two, we want to become a data-driven business with compelling customer and partner engagement models and solutions. That is a central pillar of our digital transformation strategy currently underway (or at least envisioned). The market provides solutions faster than we can innovate, build, grow, and sustain them, so we turn to third-party providers that help us sustain and even build a competitive advantage.
“Finally, while that is all great, it means we are introducing new risk into the business in terms of vendor and supplier reliability and control. So we better govern and manage all this very effectively, if we are going to trust more and more of our core business to outside providers.’
“That is the calculus I see going on, in most companies and across the board. We don’t have space here to discuss the variations and the many ways it plays out, but suffice it to say, most companies are in the middle of a long journey in which they are biting off more and more vendor/supplier risk in hopes of great success in their digital transformation journey.”
So how can this big-IT trend towards outsourcing benefit entrepreneurs?
For Jesse, it’s all about identifying markets and waves of change. If an entrepreneur can identify and then underpin emerging technical practices, like cloud migration, they are putting themselves in good stead.
“You want to be in the way of that change,” says Jesse. “You want a product or service that is attractive to a massive marketplace that’s part of a wave sweeping through the business world at that moment.”
“In big enterprise, which is my playground, the most significant wave is digital transformation and IT outsourcing. The big trend has been picking up the pace for over 10 years and, according to Jesse, will continue to do so for another 10 years at least. It will morph along the way, probably into external powering of more end-to-end business services.
But what about potential vulnerabilities? It’s a big question mark. Security is one facet of the challenge. There’s a strong security posture brought forward by the top-tier cloud vendors, Amazon and Microsoft, says Jesse. It’s just got more attention and focus than a typical enterprise will devote to the cybersecurity challenge. “Of course, you pay, and at scale, you pay dearly, for that advantage,” he adds.
“If we accept that it is a significant trend in big business to outsource IT to third-party suppliers, and more and more of this core business depends on these suppliers protecting our data, then business will become very focused on value for money.”
For Jesse, current first-generation software does not provide businesses with this assurance.
“To achieve value for money, you need to cover the following areas,” says Jesse:
“You need a way to hold your vendor accountable for cost and performance.
“But, in addition to cracking whips, the vendor needs recognition and reassurance in the hope of a long-term partnership.”
“You need productive collaboration that will offer transparency, and most importantly, you need to achieve strategic alignment based on trust.”
“When you, as a vendor, share your strategic roadmap, the customer can tailor their offerings to help you achieve these goals.
“While these are lofty goals, when we dig into the state of affairs, often we find something far short of these ideals. That’s OK; it is an opportunity, not a problem.”
Jesse predicts a lot more collaboration in the future. “We already see this more and more,” he exclaims. “Management consultancies like McKinsey and Co. and Boston Consulting Group (BCG) tell us that these collaborations are happening more and more, and are likely to continue because the business benefits are simply incontrovertible.”
“Companies that demonstrate a high degree of vendor/supplier trust and partnership outperform their peers across several measures, financial and non-financial.”