An outsourcer by any other name

Of the many novels which have won the United States’ National Book Award, there are probably few IT people who have read William Gaddis’ JR from 1975.

It may have something to do with the length (726 pages) or its style (fragmented sentences) but it probably also strikes an uncomfortable,

anti-capitalist chord among the sort of people who make up today’s technology industry.

The plot concerns an 11-year-old boy who manages to create a financial empire out of sheer cunning. Conducting his affairs primarily through letters, he manipulates stocks and bonds and inspires God-like fear: he is seen nowhere, but felt everywhere. With no headquarters, no products and no staff, JR is spooky because he is capable of running a successful business so remotely. Today, he would be an XSP.

The notion of an XSP market — the “”x”” refers to the variables of service provision — continues to thrive, even though the term creates more confusion than clarity. On Thursday IDC Canada released a report, X Marks the Spot, which attempts to quantify the XSP opportunities in this country and provide a holistic view of what XSPs are. Its forecast is encouraging: the research firm predicts growth from US$106 billion in 2000 to more than US$392 billion by 2005, with a combined annual growth rate of 30 per cent. In Canada, IDC estimates $9.3 billion was spent on XSPs last year.

It is actually quite easy, however, to come up with big numbers for the XSP market, considering it encompasses so much. This is an area that includes network service providers (NSPs); system infrastructure service providers (SISPs); application service providers (ASPs); content service providers (CSPs); and business service providers (BSPs). There are others, and the handy thing is the “”x”” leaves room to add anything else that sounds promising.

IDC Canada vice-president of services programs Lars Goransson insists in a press release that XSP contracting is “”significantly different from traditional outsourcing, which is a tailored and customized IT service offering.”” Goransson responded to my request for an interview by referring me to someone else, who didn’t return my calls at press time. I would have asked him how different XSPs really are from outsourcers, considering the release goes on to explain how they give them the “” greater specialization in the IT services they purchase.””

Specialization and customization sound pretty similar to me. Consider also that some of the most successful examples of the business model are the traditional outsourcers. EDS, for example, has acted as an ASP for clients like Air Products and Chemicals in the U.S. IBM and Comdisco also add ASP offerings in their extensive services portfolio.

Some of the challenges that come with outsourcing may be driving the enthusiasm over the XSP term, which sounds more revolutionary than it is. The difference here is not the amount to which IT services are tailored but how they are implemented. ASPs do not merely host applications for their clients but can deliver them on demand, subscription-style. Managed service providers (which overlaps with BSPs and SISPs, among others) take a more fragmented approach than traditional outsourcers by managing only a part, rather than an enterprise’s entire IT department. This is no doubt a consequence of the wariness among companies that do not want to hand over all the reigns over a mission-critical part of their business.

The effort to properly analyze and understand the IT industry often requires us to categorize key players by business models. This is often a helpful way of identifying patterns and trends. In this case, the XSP concept is not helpful because it defines nothing — you can’t provide a holistic view of a market in which nothing is whole.

The potential and pitfalls of outsourcing are forcing the business to experiment with new ways of doing it, and the Internet has provided a way of accelerating that. The acronym XSP shows we don’t know what form those ways will take. Enterprises would be better off doing what they do anyway: evaluate each service provider and its offering on its own, regardless of buzzwords. This is one blanket term that cannot nearly cover the changes underway.

sschick@plesman.com

Share on LinkedIn Share with Google+