More SOA, more outsourcing?

A rising tide created by SOA will lift all boats.

Will SOA increase or decrease the demand for outsourcing? 

I've been going back and forth for some time on this question. In my last post, I quoted Forrester's Ken Vollmer, who sees outsourcing diminishing as a result of SOA, since there will be less of the grunt work typically outsourced to save labor costs -- particularly heads-down coding.  

Sanjay Kalra saw my post, and offers some additional insights on this question. He agrees that SOA -- as it becomes embedded into business process management, will reduce some of the grunt work aspects of the outsourcing business. However, he agrees that SOA will create more work for outsourcers than it takes away. 

Consider just one aspect of SOA, reworking legacy applications to bring them into the SOA fold. Do overworked, lean mainframe staffs have time to make this happen? "The looming shift to SOA will require enterprises to put in a lot of effort into converting legacy applications to SOA/Web services," Kalra observed. "This will surely necessitate outsourcing extensive work to their offshore outsourcing partners - while this may not be an outsourcing opportunity rivaling Y2K in scale, it will nevertheless be a huge task."

He also says a rising tide created by SOA will lift all boats. "There is a good chance that as SOA and BPM improve the agility of organizations in acting proactively or reacting to business needs, there will be considerably more work done in the future - and that would make up for any reduction in outsourcing."

Conversely, SOA, if done right, could help outsourcing vendors provide an incredibly efficient and cost effective infrastructure that is far cheaper and offers far better economies of scale than the customer's own processes. Some processes and systems may be hopelessly out reach of SOA. Relatively costly and cumbersome tasks could be outsourced to a vendor that handles the same types of tasks within an SOA framework. This is where Software as a Service comes in the picture. Rearden Commerce, for example, offers businesses a chance to plug into SOA without having to lift a single ESB.

Plus, SOA could help lower barriers to entry for outsourcing providers to get into the market. The net result is an expanding market, increased competition and lower, more incremental prices.