Ownership of IT assets is one of the most important factors in determining the dynamics of an outsourcing engagement. Historically, suppliers leveraged assets ownership transfer in Infrastructure Outsourcing (IO) engagements to deliver financial and operational benefits to the buyer. However, key changes in the market reversed this dependence, resulting in increased exploration of the “asset-light” outsourcing model.
Several factors drove the increase in adoption of the asset-light model. The model provides better alignment of supplier incentives with buyer interests. Buyers find it beneficial to own IT assets due to the inherent flexibility, control, and benefits of scale. Suppliers avoid the capital expenditure requirements that reduce the Return on Investment (ROI) of asset-heavy deals. New technologies also serve as a catalyst for the asset-light approach, due to the constant turnover of the asset base and the difficulty of predicting the technology road map. Finally, the emergence of Remote Infrastructure Management Outsourcing (RIMO) played a key role in instituting asset light as a sustainable model.
The shift from asset-heavy to asset-light deals will lead to a sizable decline in outsourcing revenues, due to exclusion of assets from the purview of the outsourcing contract. However, traditional asset-heavy deals will retain the preference of certain buyers and service models (e.g., Utility Computing). The traditional approach will also persist due to outsourcers with hardware and/or software businesses, who leverage the asset-heavy approach to acquire captive customers for their products.
Note: this report is from 2012. See our most recent R2R research report.
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