The other day I was talking to an acquaintance, discussing how the idea for Alef was born. Somewhere along the line we started talking about the Software as a Service (SaaS) model and its relevance to outsourcing. This acquaintance, an experienced person who has directly or indirectly been involved with various start-ups, asked me a very simple question: Why would a company want to own anything?

On its own, the question may not make sense, so let me elaborate on the context. We were talking about SaaS and the convenience that it provides, especially to mid-market firms in reducing the need to invest in IT infrastructure maintenance resources. But then, we were talking about the risks of not owning one's software and related infrastructure, when this question popped up.

To be honest, I was taken by surprise. Sometimes, in a conversation, when we are talking about issues that are fairly complex in nature that may have fairly complex answers, simple questions as this tend to take you by surprise. Switching back to think about a fundamental aspect of SaaS took me by surprise. I did not give a convincing answer apparently. It was evident by the way in which the conversation moved on to discuss the various intricacies of Japanese Sushi and its rise in popularity in this part of the world.

But that did not prevent me from thinking about it later on, usually when I ponder over such unanswered questions and other mysteries of the Universe during my "think time." Duh! It seems so simple. If SaaS gives an organization the choice of owning something without really committing to it to a long term, why isn't everybody onboard already? Why are technology marketers investing so much time and energy in educating the market about the benefits of SaaS?

At a fundamental level, I believe that an organization would want to own what it wants to protect. Intellectual property, for example. Will organizations want to own its payroll process? Not necessarily. Isn't that why we engage with companies like ADP to do our payroll processing for us? Moreover, it is a resource-intensive activity that does not generate significant value to justify the amount of investment to initiate and maintain it internally. At the end of the day, payroll is payroll.

So here's a keyword: value. Would an organization want to own anything that it values? Maybe. From a value perspective, does it make sense in owning and controlling a specific set of software infrastructure that contributes to increasing or maintaining our competitive advantage, thus creating value in ownership? Hmm... now we are getting close!

So, if I'm an automobile manufacturer and I use assembly line scheduling software, the internal workings of which creates significant competitive advantage for me, is it valuable? Maybe. Does it make sense to "own" that piece of software and related infrastructure? I guess the answer to this would be a resounding yes.

So, maybe, we should look at a SaaS option for all software and related infrastructure that may not offer significant value under complete ownership to the organization. For the automobile manufacturer, it could be an RFP management tool. Although I am not trying to say that the process of managing RFPs does not add value to the organization as a whole, the fundamental process of managing it may be so common and commoditized, it may not be very different from how its industry peers are implementing the process. It may not be of a proprietary nature -- as is the assembly line scheduling algorithm -- thus creating a significant reason to look for SaaS options. What is the point in owning a software that does not help in creating value to your organization when you can simply use it instead?

If the reasoning mentioned here were to be used as a basis for decided when to go SaaS and when not, what about outsourcing? Isn't the reasoning behind outsourcing also about creating value? The core versus non-core process debate? But enough for one post. Maybe that's a topic that deserves a post of its own.

There are subtle signs when an industry stops being at the periphery of business and starts moving into its core. This is the time when an industry becomes noticed and talked about frequently in the media and general business circles. For the past couple of years, the outsourcing industry has been sending out such feelers, which indicates its increasing maturity, thus fueling its rate of adoption and increasing its importance among corporate managers.

One such feeler came in the form of an article yesterday published by Global Services Media, titled "Boutique Outsourcing Advisory Firms Come of Age". Quoting the article here would be easier than rephrasing it to convey its gist:

Given the pressures to make their outsourcing strategies work, organizations have increasingly turned to this band of advisory firms that specialize in outsourcing for information about service providers and their global delivery capability.

More than a third of the outsourcing contracts have been handled under the guidance of these firms. Forty-seven percent of such deals are being executed under the guidance of sourcing advisers...

Will keep you posted as and when further such signals emerge from the market.

ODesk.com, an outsourcing marketplace provider, announced yesterday that to date, contracts/projects cumulatively worth $10 million have been executed via the ODesk infrastructure. ODesk was recently featured in the Red Herring 100 Finalists list and positions itself as an on -demand global workforce provider.

I have personally believed in the value provided by upstarts like ODesk. Although marketplaces like E-Lance and Rent-a-Coder have existed for a longer duration, companies like ODesk go beyond the aspect of a market place and try to provide tools that enable its clients to function effectively in that marketplace. Although I am skeptical about its scalability in terms of, what project sizes it can handle, I am sure it will satisfy small and individual projects. (Psst… I heard somewhere that the Technorati website was built by outsourcing it to someone via ODesk - I am not completely sure when or where I heard this information though!)

With the conclusion of Gartner Inc.’s Outsourcing Summit last week at Dallas, we should be expecting to see some analysis, forecasts and general opinions on the Outsourcing industry in the media this week. Here’s one of them.

This article in Computerworld highlights the issue of rising costs in Offshoring to India and the alternatives that were discussed during the summit. To quote some of the interesting snippets from the article -

“One conference attendee whose company runs its own offshore development facility in India agreed with Gartner’s assessment of the wage increases in India. “We’re finding that ourselves,” said the attendee, who requested anonymity. He added that his CIO asked him last year to investigate other countries, and his company is currently looking at China as a possible alternative for offshore IT work.“

The primary motive behind sticking with India seems to be the location’s ability in providing the assurance of availability of a large pool of skilled workers. Although information executives are not against looking at other regions of the globe, the standard of service that has already been established by India based service providers seems to be hard to match, by providers from other locations.

But I have always found that the most interesting piece of information in such articles is always in the discussion that ensues between the proponents and opponents of outsourcing in the discussion thread. The discussion thread in this articles seems to indicate that it is going in a similar direction as well!

Stay tuned… more analysis and forecast will follow.

- Vinod

All right... it took me awhile just to digest the fact and make sure that I was reading it right. Yes - outsourcing does NOT necessarily mean outside the United States. It can be the other way too. Apparently, according to “The China Post,” the India Embassy in Washington, D.C. plans to outsource the processing of visas to an American company. And before you start thinking, “It must have been to another company based in India,” wait! It seems that they have been fairly open about the vendor selection process, by advertising in the Washington Post and soliciting proposals from any company to take on this work.

And why did I read about it in a Chinese newspaper, rather than an Indian one? I have no clue!

-- Vomo