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Keeping Watch for 11 Trends in 2011

by: Ronald Escanlar

Wednesday, December 22, 2010 |

This year, we saw the global economy greatly affected by the effects of the U.S. recession. Outsourcing, though, continued to mature and develop, with the Philippines getting the top spot as the preferred global destination for outsourcing.

For 2011, Network World reports that the outsourcing industry will witness massive changes, from undervalued contracts to cloud computing woes. The publication, a member of the International Data Group (IDG), supplies “information, intelligence and insight” for network and IT executives.

Outsourcing trends in 2011

Stephanie Overby, Network World’s chief information officer (CIO), cites 11 outsourcing trends to watch out for in 2011:

1. Outsourcing goes micro. New buyers, who sat on fences watching the 2010 downturn, will now sign small IT services deals with service providers. In these “small” deals, providers will use the classic “penetrate-and-radiate” strategy to “enlarge” these deals.

2. Search for savings. With the economic downturn, network and IT executives will seek savings from their current outsourcing deals. Existing contracts will undergo scrutiny for under-deliveries and over-payments.  

3. Cloudsourcing surge. Outsourcing consultancy Alsbridge says the outsourcing market will merge with the developing cloud sourcing market to “drive the rebirth of outsourcing.” The company notes the effect of Amazon, Google, and Rackspace, reducing the profits of industry giants HP and IBM. Legacy providers may react to this fusion either by merging with other providers or by acquiring younger companies.

4. CIOs face risks with back-door deals. Business unit heads will leave out IT executives in discussing and deciding about cloud computing and its services, secure in the fact that CIOs can solve issues later on. This scenario can create problems, especially if the CIO is unequipped to solve them.

5. Rise of “vanilla” packages. Customized packages will slowly be phased out, as clients start to accept standard, “ vanilla” services, and providers being standardizing their offerings. Outsourcing consultancy EquaTerra says standardization may also permeate processes, technologies, and even locations.

6. Stable prices. Outsourcing service providers will no longer market themselves with lower prices, but will instead sell the quality of their service and their varied offerings. Customers will choose their providers based on delivery models, agreements, and other advantages to maximize cost savings.

7. East-West mergers. We may witness an Indian acquisition of an American company this year, industry experts say. Indian service providers are ascending the value chain to differentiate from other providers. As India focuses on consulting and integration service deals, their labor force is adding more skills to their offerings.

8. Shift to emerging economies. Brazil, China, and Egypt – countries with improving economies – are becoming choice destinations for service providers. Aside from cheap, skilled labor, their citizens have strong purchasing power, something service providers can also profit from.

9. Growth despite protectionism. The unemployment rate in the U.S. stays high in spite of government efforts to curb the worsening downturn. U.S. legislators are proposing protectionist policies to stem the overseas shift of American jobs. Indian service providers may react by acquiring an American company to improve their onshore presence.

10. Enhanced mass automation. To maintain cost savings and profitability, service providers will turn to automation. Technology can enable optical character recognition to replace human data processors, and even lights-out, employee-free delivery centers can be established instead of facilities teeming with human operators.

11. Offshore work migration en masse. As more and more work are shifted offshore, the technologies and methodologies supporting such gargantuan shifts are improving by the minute. Large numbers of skilled employees can be activated almost immediately for offshore delivery centers.

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