By: Ciopages Staff Writer
Updated on: Feb 25, 2023
What is the impact and implications of artificial intelligence on IT outsourcing? The outsourcing of IT brings inherent issues that can hinder enterprise operations, including security risks and slow response times. With technological advancement, artificial intelligence, or AI, may become a solution for these issues. Discover five ways AI will transform IT outsourcing via enhanced automation, improved control, reduced costs, better contracts and increased security.
The ability to have actions executed immediately is an important aspect of staying competitive in the business world. AI technology may augment the speed of executable tasks to enhance automation. Time is a constraint that technology leaders must consider when creating enterprise strategies for IT operations. The time it takes for outsourced IT vendors to respond to an emergency, such as an enterprise-wide system failure, can adversely impact production and, essentially, the bottom line of the enterprise.
AI’s machine learning and deep learning can empower automation, letting these software applications learn rather than simply follow a programmed command. Understanding and decision-making may be IT functions that can be outsourced to let employees work on higher-level projects or tasks. For example, AI can make judgement-based decisions given input that is unstructured, such as deciphering terms of contracts or invoices. Outsourced IT vendors that implement AI technology in their business models can offer enterprise solutions that have the potential to interpret information automatically with fewer errors than humans so enterprise goals can be reached with enhanced productivity.
Babson College professor Tom Davenport points out in his CIO Journal article that the United States is a prominent contender for returning offshore business processes back onshore, but to machines rather than humans. This is because the country is a leader in automation and also a huge buyer of offshore business processes and IT services. However, outsourcing businesses, such as Wipro and Tata Consultancy Services (TCS), are integrating AI technology by investing in these platforms to stay abreast of automation.
The adoption of AI technology in enterprise has the potential to shift control from the supplier to enterprise buyers. For example, technology leaders can assess costs for outsourcing IT functions versus keeping it in-house if purchasing AI technology.
Additionally, enterprise buyers may decide to license the technology rather than use offshore human resources. This action allows enterprises to gain control over processes and security to prevent silos that can otherwise delay operations.
AI technology stands to reduce IT outsourcing expenses because of its agility and because it reliably processes, analyzes and comprehends information. Additionally, common hidden costs inherent with outsourcing an IT department, such as the time needed for on-the-job training, are reduced or eliminated. These hidden costs can be reduced thanks to AI technology’s ability to train itself on tasks through machine learning techniques such as deep learning.
Additionally, costs can be reduced because the technology does not have to be physically located in one place, as a human would. This factor can significantly reduce labor costs for suppliers that adopt an AI strategy into their business models.
AI technology opens up new opportunities for IT outsourcing that can affect current service terms and service-level agreements. It will also impact how IT executives negotiate contract terms. Cost will not be a sustainable competitive advantage as the combination of time, advances in technology and increased demand meet to create economies of scale, giving more flexibility in price and terms to an enterprise buyer.
However, CIOs and technology leaders should anticipate the impact AI will have on contracts regarding ownership of the technology because it has the potential to bind an enterprise to a specific supplier. It will be important to negotiate terms involving ownership of the AI technology if the enterprise’s strategy is to bring the technology back in-house.
One important factor native to outsourcing IT is the increased risk of data security breaches and compromised private information. Employees who may not be properly trained or have malicious intent can take advantage of the vulnerabilities within your enterprise infrastructure, and outsourced employees may not prioritize sensitive data. AI technology offers the possibility of bringing offshore services back on-shore or even in-house as a way of reducing these risks.
AI technology can be used as a trusted resource when initially taught correct actions to take. As IBM “Security Intelligence” writer Rick M. Robinson points out in an article discussing safety when using AI for business processes, current AI technology concentrates the intelligence of humans; it does not emulate it. AI technology can work with human experts to predict and identify security breaches. This phenomenon is demonstrated by MIT’s AI2, which can forecast more than three-quarters of cyber attacks with the help of human expert input and big data. Using IT outsource vendors that integrate AI technology, or provide the option to release the technology to your enterprise after a specified licensing time, can mean increased security for your enterprise.
Digital disruptions such as AI technology are enterprise interruptions that CIOs and technology leaders cannot afford to ignore. AI technology is still in its beginning stages and has yet to be adopted by enterprise. Understanding the impact artificial intelligence could have on IT outsourcing is vital for strategizing enterprise operational goals.
AI stands to transform IT outsourcing by promoting efficiency through automation, reducing costs, providing control, increasing security and improving negotiation terms for contracts. These capabilities will prompt technology leaders and CIOs to consider outsourcing vendors that have an AI strategy or, perhaps, forgo outsourcing altogether.
Can you think of other ways Artificial Intelligence will change IT Outsourcing? If so, please share your thoughts.