Middlesourcing is a term that helps to illustrate how firms in Singapore and SE Asia can benefit from the technology waves in China and India, and create a new niche area for business. As a regional hub (with similar time zones with that of India and China) with a wired-up populace and strong e-government infrastructure, Singapore can leverage its position as a middleman and become specialists in managing outsourcing relationships that have started in India and China.
At a microeconomic or enterprise level, competition in Singapore as one of the most open markets globally is intense. With little or no impediments to global competition, middlesourcing becomes a key differentiation to delivering consistent, high quality, end-user experience. The ICT industry in Singapore is increasingly being challenged in this regard as costs of doing business and investing in Singapore is higher than the rest of the countries in the region.
Further, as a regional hub, Singapore must leverage its position as middleman. For example, while applications are being developed in countries such as India and China (for example, the ERP and SCM applications used in the manufacturing businesses), the IT teams in Singapore can build expertise to oversee and manage the performance, availability and quality of the applications.
The key issue that Chief Information Officers (CIOs) often complain about is the relationship aspects of outsourcing and the time it takes to manage these outsourced developments. From here, we can clearly see that applications and their quality and performance are critical for enabling the business.
And yet, CIOs are grappling with statistics such as:
- 40% of defects are found by the end-user (Gartner)
- 50% of applications launched into production are rolled back (Gartner)
- 80% of all applications are put into production without being comprehensively tested (Gartner)
Middlesourcing can help these companies manage their outsourced projects’ quality and costs and realise their return on investments (ROI) faster. It will also help lower the total cost of ownership by outsourcing the manpower to manage the outsourcer, thus allowing companies to focus on their core competencies. Contrary to managing an additional third party, in "middlesourcing", the outsourcer can benefit from having greater visibility and control over their IT operations and current outsourcing contracts.
Many companies often outsource taks such as software development. Problems occur when software development is outsourced without first checking that the outsourcer has a good quality assurance and testing process in place.
These problems are reflected in Gartner’s findings that 80% of IT failures stem from application failures where half of these come from people and process issues related to infrastructure changes, configuration and problem management. While the other half includes failures caused by bugs and ineffective application change-management processes.
Fig. 1: Managing Outsourcing – Singapore’s ‘Middleman’ Role
Application Management’s Critical Role
With enterprise software now automating most key business processes, applications have literally become the business for many organizations. According to Yankee Group, approximately 90 percent of mission-critical business processes have been automated by enterprise applications. To better align IT resources with the needs of the business, IT executives have shifted their focus from monitoring system and infrastructure performance to business?centric application management.
Effective application management gives IT executives the ability to:
- Have real-time visibility into the status of critical automated business processes
- Mitigate the business risk of planned or unplanned application or infrastructure changes
- Prioritise the resolution of application issues based on the severity of the impact to the business
It also allows IT organizations to measure and manage the things that matter the most—even dealing with outsourcers. According to Yankee Group, "True application management requires a different expertise—an understanding of the end-to-end application, the infrastructure relationships, and their impact on business value and end user experience."
Application management, especially for applications that have been outsourced, is a critical capability for the IT executive because:
- Failure of applications means failure of the business (downtime costs average USD 100k per hour (Gartner)
- 80% of IT downtime is caused by application failure and operational process mistakes (Gartner)
Therefore, effective application management when outsourcing software development work enables a company to have real-time visibility into the status of critical automated business processes where problems found can be fixed before customers experience problems.
Additonally, it can mitigate the business risk of application or infrastructure changes and map applications to infrastructure streamline resolution process to prioritize the resolution of application issues based on impact.
Intense competition, driven by one of the most open global markets necessitates that the Singapore IT team delivers a consistent, high-quality end-user experience. As a regional hub, Singapore must leverage its position, and build strong relationships with countries such as India and China, to become specialists in managing outsourcing relationships. India and China have emerged as a high-growth, end-user of applications, right from ERP in manufacturing, supply chain management to HR management and systems.
Singapore has a short window to leap frog the IT value chain and help companies avoid the excesses seen in the early days of outsourcing. It also has a major opportunity to oversee and manage key service level agreements (SLAs) and drive the business outcomes for IT operations outsourced to other countires. To date, early adopters of the ‘middlesourcing’ model, including financial institutions such as Maybank and a large international airline based in Singapore, are already reaping results and creating a new niche area for business.
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