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4 Trends in IT Outsourcing

by: Sarah Joson

Wednesday, August 6, 2014 |

Over the years, it has been observed that more and more companies are incorporating outsourcing to their business operations. With the numerous IT solutions offered in the market today, chief information officers (CIOs) have to weigh in the pros and cons of outsourcing and how these will add value to the company as a whole.

InformationWeek.com shares some of the top outsourcing consultants’ insights that are said to be driving the IT outsourcing industry.  

1. Cloud is gaining more traction.
Cloud technology is becoming more popular among multinational companies and can soon make traditional outsourcing a thing of the past. However, CIOs should not forget that in some ways, cloud integration is also a type of outsourcing since they would have to source the technology as an add-on from other companies, or have an external cloud service provider to manage the cloud software for them.

An expert pointed out that large IT players are acquiring smaller cloud providers so they can still offer cloud technology in a traditional manner. This is also to avoid being priced out by the direct cloud technology providers.  

Back then, the public cloud was taboo for a lot of companies because they believed it could pose a threat to data security. Now, it is being used as a primary tool in developing, testing, and even running live applications for customers. A lot of retailers use the cloud since it is faster and more economical and accessible.

2. Dynamic pricing: low cost vs. outcome-based.
Outcome-based pricing is a new thing in the world of outsourcing because of its complexity. Normally, pricing is fixed and is based on a certain timeline or number of outputs. But those things are not considered as major factors when looking at the initial goal of the outsourcing campaign.

In a call center, for instance, the high volume of calls does not immediately equate to success, because their main goal is to help the client on the other line. What clients want is value for their money, meaning they strongly consider the quality of the output and they are analyzing if they are getting their money’s worth.

3. IT providers in India are more competitive.
India’s IT outsourcing industry is more bullish than ever - even beating US-based providers. The large Indian IT providers like Wipro, HCL, and Infosys can now be seen going head-to-head with IBM, CSC, and Hewlett-Packard and the tie-breaker is cost. These offshore providers can be accessed through remote management of data center monitoring, servers, and patching.

India can produce a large number of IT graduates per year, and the lower cost of labor is attracting foreign investors.

4. Insourcing is also making a comeback.

Offshoring still has drawbacks such as language and cultural barriers, political instability, and inflation. This is making way for smaller, rural areas in the US and Canada, which are both major outsourcing markets, to become "domestic sourcing" locations.

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