I was reading Phil Wainewright’s nice note on multi-tenancy “The cloud operates within a service-oriented architecture, where providers achieve economies of scale by delivering their services in volume and operating them from pooled resources.” (italics mine)
I drifted off wondering why the outsourcing world has not aggressively pursued – and passed along to clients – the benefits of economies of scale and pooling when it comes to talent.
It looked so promising a while ago.
In 1996, at Gartner, I wrote a research note, which introduced the concept of Shared Solution Centers (SSC).
“An SSC enables consulting clients to derive economies of scale and to leverage dedicated resources. Clients can achieve this by allowing their consulting firm to perform certain phases of the project at a solution center, or by remote dial-in access by the staff at such a center…. Good candidates for SSC-based services include configuration of software parameters, writing of custom code, performance benchmarking, testing, development of reports, and documentation development. A dedicated team of testing specialists can keep up with a variety of testing tools and techniques - across multiple application vendor projects.”
I even defined a maturity model:
In Stage 1, an SSC is primarily a "showcase" for software demos and training. In Stage 2, the SSC can be used for "jump starts," while the client builds its own infrastructure. In Stage 3, certain project phases such as report development are done at an SSC. In Stage 4, more project phases including testing are done at the SSC, and the SSC reaches "scale" - at any given time 20 or more clients are being serviced from an SSC. Finally, in Stage 5, there are phase-based "factories" where testing or data conversion specialists and tools can be leveraged across multiple projects, whether on SAP, Oracle or other software.
In 1998, I described Andersen Consulting (now Accenture)’s SSCs in another research note
“AC's ERP-focused SSCs (11 in the United States, 11 around the world) have allowed its clients the following flexibility:
- A U.S. AC client used the Las Colinas SSC for R/3 Basis support, Chicago for mass-report development, and San Diego for end-user training development.
- A South American client moved its design team to a U.S. SSC. It reported improved productivity by being closer to the specialists instead of having them fly to its location.
- Several clients have outsourced "post-live" SAP operations support to the AC Cincinnati SSC.
The SAP model is being leveraged to other ERP initiatives (e.g., PeopleSoft) and for other IT services. Today, AC SSCs house a staff of 2,000, expected to grow to 8,000 by 2000.”
In the last decade I have seen the emergence of huge outsourcing campuses in Bangalore, Beijing, Budapest and elsewhere. `They would appear to be the realization of what I had described – huge economies of scale and pools of specialist resources.
But go into the buildings, and you see floors or sections of floors dedicated to individual clients. They are secured tight. Restricted access, PCs with USB ports sealed off – all in the name of protecting client specific IP.
While there are some shared economics – in training, in physical and telecom infrastructure for the staff, the big sharing opportunities I had envisioned have not happened.
Outosurcers say clients tie their hands. Sure, if you are doing proprietary product engineering work for a client, they absolutely want it kept away from other companies. If you are supporting a custom legacy application, there are not many sharing opportunities. But when you are supporting hundreds of SAP or PeopleSoft environments there are plenty of commonalities across the clients that can leverage pooling concepts.
I am actually surprised cloud vendors don’t use this more in their positioning against on-premise vendors. Look at how few staff Salesforce.com or Workday need to support thousands of customers. In contrast look at how many staff IBM or Infosys need to support each customer in on-premise mode.