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August 2009 Quick Hits - News, Trends & Analysis

Indian Outsourcing Going Strong
It appears that the recession has enabled the tier 1 Indian vendors like TCS, Infosys, Wipro and HCL become more competitive in the space of large outsourcing deals. According to TPI, they have been placed among the top 10 global services providers on contract value terms, and even though the total awarded deals fell by 22% to $40.2BN, the India offshore providers are competing neck and neck with the likes of IBM, Accenture and CSC. As commented on offshoring times "Indian firms dominated the information technology outsourcing ITO segment USD33.2 billion, split into application, development and maintenance, ADM and infrastructure segments". So it is evident that offering low cost solutions has excelled in this market, but they are also winning more deals due to the heavy investment in niche consultancies and recruitment of local talent to manage business development. 5 years from now, there will likely be little differentiation between the large offshore and traditional service providers.

Difficult To Measure Outsourcing Value
In a recent outsourcing study conducted by Warwick Business School, 263 CIOs with annual spends of between £3 - 61 Million were asked if they knew the financial value of outsourcing to their business. Less than half responded that they could. Some said they have manual calculations, while others use software that provide metrics on the cost, but they all agreed it is difficult to measure value. As Julie Kotlarsky comments on sourcingmag "A combination of proven methodology, industry expertise and tight integration of businesses' strategy into outsourcing objectives to effectively measure, improve and communicate outsourcing's true impact, is required to ensure outsourcing delivers on its promises," The CIO should have a dedicated finance person working with IT to implement and monitor the business value of the outsourcing engagement. Clearly define metrics that can contribute to ROI, communicate awareness to the IT managers and automate data gathering where possible.

IT Outsourcing Grows In Recession
Every article we read these days talks about shrinking, falling, and declining numbers - apart from stories related to government debt - and yet analysts predict that the use of third party services will grow in 2009. Pierre Audain from TechMarketView stated that "spending on software and IT in the UK will reduce by 1.36 per cent across the year, despite long-term forecasts being positive. However, IT outsourcing investment is predicted to rise by 3.1 per cent during 2009, compared to software spending, which is expected to decline by 5.5 per cent". The question remains - will this trend continue if the conservatives win next year as they might shut down some of the large government projects? Hopefully, improvements in the private sector of the economy can counter balance potential reductions in government spending.

 
 

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