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IT Outsourcing Predictions for 2014

by: Sarah Joson

Tuesday, January 21, 2014 |

2014 IT Outsourcing Forecast

A lot of things had happened in the global IT outsourcing industry in the past year. This 2014, CIO.com released a compilation of forecasts they have gathered by interviewing outsourcing observers and experts.

1. This will be the year for artificial intelligence.
For the manufacturing and logistics segment, Shawn C. Helms, a partner at K&L Gates, said more and more firms will adopt robot-like technologies which are predicted to automate man-powered processes this year. He also noted that robots will soon move up the value chain over time. Jonathan Crane, IPsoft’s chief commercial officer, on the other hand, questioned the longevity of this trend should it persist. He noted that this could be a cause for the downfall of labor arbitrage all over the world.

Another industry expert stated that this could be a solution to the rising labor costs as CIOs are looking for alternative ways to reduce and manage operating costs without having to automate everything and rule out manual processes.

2. Rise of hybrid sourcing

An executive predicted that in 2014, offshore outsourcing as a business model will lose its lustre as the hybrid model where offshoring and insourcing will be more utilized in operations. However, one factor that is expected to remain in the new model is common management. It is anticipated that companies will find the best combination that will suit the requirements of their business, which includes finding the best talent for the job and cost efficiency for IT services.

3. Insourcing will also become more popular.
Stan Lepeak, global research director at KPMG, said 20 to 30 percent of the outsourced IT processes will be brought back in-house as more organizations feel the need to have more operational control on the services. IT services management frameworks are also on the rise which is expected to fuel the movement of outsourced process back in-house.

4. Service integration will be insourced as well.
After the experimentation period where clients transferred multi-sourcing management capabilities to providers, it is projected that service integration will be absorbed back home. It was found that most outsourced models fail to deliver positive results and are often causes of additional challenges for executives such as loss of control and visibility in their outsourced operations.

5. Doubt in the cloud
Cloud frameworks are anticipated to become more detailed as clients want to manage IT services more effectively, especially now that they are waiting for clearer reports on how their investments are put to use. They will be doing this until they have gathered enough data to use as benchmark. Meanwhile, service providers will be adjusting to the changes in the demands of the market.

6. Collaboration is key in multisourced operations.
Since most organizations that use multisourcing created "cooperation agreements" for their providers in 2013, it will be more utilized in 2014 as more and more firms are adopting the multi-sourced business model.

7. Pricing models for IT deals will be less constricting.
Financial commitments will be more flexible this year as IT outsourcing customers are starting to mature and have gained knowledge on how to make deals according to their company’s preferences. Providers will start to offer services and products at a lower price range and packages such as annuity subscriptions to retain clients without imposing long-term commitments.

8. India to take over infrastructure deals
India is expected to gain traction in infrastructure deals as experts expect them to shift from application development and business process outsourcing to a destination for infrastructure development.

9. Deals will be scaled up or downsized.
Large outsourcing deals are expected to be broken down into smaller, multi-sourced ones and small deals are expected to be augmented to midsize as clients want to expand operations with their current providers.
10. Control will be the core of each operation.
Organizations will make sure that control and management will be the core of their outsourced operations. This is in line with their need to manage performance and risks now that global business services are becoming more complex and diverse. However, clients will face hiring challenges because of a shortage in the talent pool for managers.

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