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November 2008 Quick Hits - News, Trends & Analysis

UK Trends in Outsourcing
Exigen Services presented a report at an NOA event last week. They highlighted that the primary reasons for outsourcing fall into 4 categories:
- 50% cutting costs
- 33% improve quality
- 28% strategic alignment
- 25% improved flexibility
Tony Adams from Alsbridge commented on the UK trends. They are seeing more growth in the mid-market private sector, and as the government takes a more leading role in the economy new opportunities will arise in the public sector. Within technology the fastest growing areas for ITO will be remote infrastructure management, IT as a service (ITaaS), and software as a service (SaaS). IT projects with a positive ROI within the short-term will be favoured over long-term strategic projects. Overall they expect an ITO growth of around 1-3% in 2009.  
Will Indian IT Outsourcing Benefit in the Downturn?
JP Morgan analysts said the current slowdown will increasingly push work offshore, and Indian IT companies are already seeing large outsourcing deals in the pipeline. They remain fundamentally positive on Indian IT on a 12 month perspective. Near term growth, however, might remain weak as decision-making timeframes have grown given market uncertainty. But apart from lawyers I don't see many local or off-shore outsourcers benefiting from a global recession. The Indian technology job market has finally started to cool, and some vendors were even reducing head count as a respond to the falling demand. I think there will be no clear winners in a global recession, but there is no doubt companies with a lower cost base will win more deals as companies focus on cost cutting rather than top line growth.  
Slowdown in Outsourcing as the Credit Crunch Bites
I have read numerous stories trying to predict how outsourcing will be impacted by the credit crunch. How will outsourcing change/adapt as companies deal with a global recession. In the news last week 20,000 unfortunate people lost their jobs in the UK - not due to outsourcing, but rather from business contraction. There are conflicting stories about the impact on outsourcing. Some analysts predict virtually no growth for 2009, and other advisories have predicted a small rise 1-3%. According to TPI's recently published quarterly outsourcing report, the top 128 outsourcing contracts signed from Q3 2008 were worth $14.4 billion - a year on year drop of 22 per cent. Outsourcing has always been associated with cost savings and now with all companies setting aggressive cost saving targets for 2009 we may see more and more outsourcing contracts come to fruition, unfortunately during times of fear & uncertainty directors take twice as long to make a decision.  

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