Outsourcing / Off shoring in Internet of Things – Next big opportunity – Part 2

As promised, this is the second part of my view on Outsourcing / Off shoring and IoT.

Since IoT is still in an early adoption stage, there are mostly pilot projects being done in serious business applications. Given the research-oriented nature of these projects and the maturity [or lack of it] of the IoT platforms being used for them, most of the work is getting done in-house or by the platform vendors. As these dimensions are not conducive for outsourcing being successful. Cost is also not a major factor because the finance guys are also getting their financial models in place to ascertain the ROIs on such investments.

When IoT adoption moves to the next phase [after having proven their worth in pilots] to actual deployment across different divisions and across the globe, there will be a huge need of resources across different technologies including platform specific insights. Cost and availability will play an important role in that phase. Outsourcing and IT services firms, need to and are preparing for such eventualities.

There are a few factors to evaluate on how / where should the services organization focus on to prepare for this opportunity.

  • Technologies – IoT is a coming together of multiple technologies namely
  • Hardware / PCB – design and development. Gateway
  • Embedded development – including knowledge of protocols like MQTT, 6LoWPAN, CoAP, XMPP, etc, IoT Gateways play an important role in this
  • RF related development – including ZigBee, Z-Wave, Bluetooth / BLE, etc
  • Cloud development and deployment – Data streaming, complex event processing, etc
  • User interface for managing devices and newer workflows that emerge from these deployments. This includes mobile-based development and development platforms.
  • Big data and analytics – for generating intelligent business insights from the large data coming from the sensor nodes
  • Last but not the least, integration of the IoT systems with the existing enterprise solutions deployed

There are certain areas where existing IT services vendors are quite proficient in and can quickly scale up. Though, other areas will be very new for them and they will have to either tie up with specialized vendors or start building their competence on.

An obvious question here will be whether there will be a need of resources who have knowledge of all these technologies and their interaction or having competence in individual areas would suffice. This question is still out in the open, but my view is that a combination of the two will be needed. This entire system being too new to a majority of the folks, not having deep understanding of how these operate and the challenges around them will not make them very effective. Keeping this in mind, Axelta has recently launched a weekend [2 days] training cum hands on workshop to get the engineers experienced with all aspects of these technologies and their interaction.

  • Domain – I mentioned in my previous blog on this topic, domain will play a more important role than ever in successful deployment of IoT solutions. I had brought about this point in my first blog post IoT – connection between real and virtual world where I had mentioned that vast gap between real and virtual world is getting bridged through IoT. Therefore, people who have worked in the real world are deep subject matter experts in that space will play a very critical role in success of IoT. Which means, that besides the consultants and analysts who have built a reasonable understanding of the domains / verticals through study and consultation, folks who are embedded into the verticals will be needed. That is an opportunity for the industry people but a challenge for IT services organizations
  • Product – IT Services firms have till now depended on just the services. Which has been very linear model and over last decade, there have been a lot of cost pressures on them. There have been many attempts to move up the value chain and build products that can move them away from the linear model. Though, the success in such investments have been very limited. Main reason being that the entire management structure and the overall engine has been geared up for providing IT services. Given that this is an entirely new area and there is a space for multiple new players, IoT throws a very good opportunity to these firms to make the transition. The challenge though being that they still have the same engine that is geared to get more head counts and more billing. A very good option for these firms could be to dig into their large cash piles and buy out some of the IoT start ups in India or in the western world. Give them funding and freedom of operation, nurture them like CISCO has done in the past and like Microsoft Ventures does and then absorb them over next few years

Focusing on product / platform is also important at this point in time because that is where most of the action is happening right now and will happen over next couple of years at least. Till the time a few companies emerge as the leading contenders like SAPs and Oracles and Googles of the world.

  • Managed Services – This has been a trend over last decade which has now picked up momentum. Where industries outsource their entire IT or IT enabled services to outsourcing firms. IoT will need much more of these managed services. It will also enable such outsourcing through larger automation and bridging the gap from the real world. IT services firms that gear themselves up for providing managed services leveraging their or external platforms have a lot to gain from IoT over next 5 to 10 years.

To summarize, IoT and M2M is a brilliant opportunity for IT services firms for ensuring their growth and profitability over next decade but they will need to get their strategy right as well as be ready for changing their proven models to succeed in the IoT outsourcing world of the future.

 

Outsourcing / Off shoring in Internet of Things – Next big opportunity

Outsourcing today, especially IT outsourcing, is something which is considered a part of any project plan, development lifecycle. It has become a part of IT landscape, adding huge value across the globe. I distinctly remember a time when large numbers of articles were written about how outsourcing will fail when it comes to complex processes etc. All those scenarios failed to deter the outsourcers and today anything and everything (almost) is welcome to be outsourced.

As Business in IoT starts to boom and comes out of labs and R&D centers, how can outsourcing be very far behind. As Internet of Things has to do with both physical devices and software components with a decent sprinkling of networks, communication protocols and clouds thrown in, outsourcing will be challenging to begin with but will surely happen. I believe outsourcing in IoT to reach similar levels as that of traditional IT program over the next 3-4 years. Already beginnings are being made around the world, especially in India, to make that happen. Most Indian IT services companies have started labs/ R&D centers in their campuses focusing on developing these skills.

Though, there is a significant difference in what tradition software/BP outsourcing and IoT outsourcing will entail, especially on development side.  As there are hardware components and intense domain skills involved in developing devices, analysing the data produced, I believe the smaller Indian IT companies, with specific domain and technical skills will gain a good chunk of this market. This is the chance that these small companies should utilise to grow big.

There are 3 distinct areas in which companies need to focus to get ahead of the curve and get outsourcing deals.

  1. There are several domains in which capabilities need to be developed. IT companies will have to hire agriculturists, doctors, radiologists, scientists, environmentalist and meteorologist etc. to be able to get IOT deals. Large numbers of opportunities are going to open up in water management, security, environment, power, transportation, logistics and healthcare.  Companies which have deep skills in such areas will be having distinct advantage to get outsourcing deals. Analytical skills w.r.t technology (Big data) as well as domain could make a real difference and get you deals.
  1. New technologies, protocols, hardware’s need to be mastered. Protocol’s like MQTT, IPv6 (6LoWPAN) , ZigBee, GSM, RF need to be mastered. Companies, start-ups which are developing their own devices, gateways will be in a good shape to get outsourcing deals as they would be in the groove. Start-ups which are developing their own low cost solutions like device management platform  can easily get into integration related outsourcing deals.  As large number of companies are being set up by domain specific people around the world, Indian companies with deep tech skills will be able to get the deals to actually develop the software, hardware components needed. Getting to Customize solutions for particular business needs and catering to different markets might also be a good business model.
  1. Traditional businesses like call centres will also get a chunk of business in catering to monitoring devices, alarm handling, processing data, device selling, device on-boarding etc. As the number of connected devices continues to explode, equivalent rise in such business to outsourcing companies will happen. IOT trained staff will be key to get such deals. Large Indian BPO/Call centre companies will have a distinct advantage in getting such deals due to their scale and reach.

The Golden period of outsourcing is yet to come as IoT in itself will present a huge outsourcing opportunity globally. It has already started and trickle is all set to become a deluge in coming years.

China has already taken a lead in both building the electronic components and actual adoption in IoT, but an interesting development is newer product development companies / start ups coming in India that are focusing on product design and innovation. Likes of Gecko are a case in point. I see innovation off-shoring besides the typical cost arbitrage as the next big opportunity for Indian companies as there is a huge runway available and the innovation talent available here can play a significant role in future. More about this in my next post.