Source: seekingalpha.com
ITO Market Trends in 2008

Overall, demand in the market for IT & BPO services continue to expand in 2008: The main factors driving outsourcing is continue to be cost and access to skills not available in home country.

Mega-deals are vanishing: In 2007, Mega-deal segment with $1-billion in total value or $200 million annual contract value, are dropping in both number and size. As client relationships with service providers are maturing and some of their past experience with service providers has taught a lesson that they didn’t deliver what they promise. So, they don’t want to handover all their requirements to one service provider. Mega-deals are expected to diminish in 2008 except few exceptions.

Matured relationships with large enterprises (clients) will lead to expansion towards complicated ADM functions to outsource: ADM market is expected to show sustainable pace of growth of about 7% from its current level of 12%. The maturity in offshore delivery of ADM services will lead to demand for complex ADM services ( e.g. Solution design, architecture). Offshoring complex ADM requirements will move the relationship between the service provider and buying organization (clients) from supplier-buyer relatioship to partnership-based relationship.

Remote Infrastructure Management Outsourcing [RIMO] model continue to gain market share, growing at 60 to 70 percent and traditional model of IO will start to show declining trend. A shift toward asset-light deals in both RIMO and traditional models will result in revenue deflation as assets start getting excluded from the scope of IO engagements.

Maturity in adopting sourcing models : Setting up captives in low-cost countries like India is expected to slow down in 2008, except the captives are established for high-end work like R&D or engineering services. Other sourcing models like BOT will also fade away from the market due to the mounting challenges after transfer phase at the client-side. There will be a matured approach in sourcing offshore IT and BPO services at buying organization (clients), where in buyers (clients) are expected to use the right mix of third-party service providers and other sourcing models in 2008.

Competition: Big outsourcing firms and India’s outsourcing firms will see competition from outsourcing firms from other low-cost countries like China, Philippines and Russia heavily in 2008.

Supplier-Side (Service provider) Trends in 2008

Offshore service providers continue to grow inorganically : Offshore IT and BPO service providers will continue to acquire firms in Europe and US for niche skills, business domain and delivery capabilities, and also for the client pool.

Service providers to push total outsourcing solution (includes application, Infrastructure and BPO services): Maturing relationship with clients and broaden portfolio of outsourcing services at service providers expected to create a consolidated sourcing approach among buying organization (clients). Large enterprises will get incremental benefits from outsourcing to single service providers, this will also helps in understand client business to add value.

Verticalization will soon become important service provider-selection criteria. Service providers with vertical domain expertise to understand client business is going to be significant differentiator in the market place. This is a potential space where India’s outsourcing service providers can arrest their weakness spelled in the market as ‘undifferentiated service’ to well-differentiated services in future.

India’s outsourcing firm will expand their US presence: Growing demand for H1B is becoming business risk for Indian IT companies. They need more employees in US to serve large deals and also needs onshore employees to deliver complex AO and consulting services. Expanding onshore presence in US is also going to help in wining confidence among clients, who have concern around intellectual property protection and moving data outside the country.

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Source: www.hindu.com

A three-day international conference on outsourcing trends and managerial issues will be held here from January 7 to 9.

About 150 delegates, including from the US and Europe, will participate in the conference, R Balachandra, chairman of the conference and K V M Varambally, Director, Manipal Institute of Management (MIM), told reporters here.

Eminent researchers, representative of industry and financial institutions will also take part in the event.

Academicians from Binghamton University (US), University of Texas (US), Lappeenranta University of Technology (Finland), University of Southern Queensland (Australia) and Northeastern University, Boston (US), would attend the conference.

Industry participants would be from Infosys Technology, HP and Philips Electronics India Ltd.

The conference is jointly organised by the Manipal Institute of Management, Manipal University, Manipal College of Business Administration and Northeastern University, they added.