New face of outsourcing? Russian IT Quarterly (#26, Jan 2011)
Jan 20, 2011
New face of outsourcing?
It's traditional at the beginning of a new year to try to predict the future, guessing what the defining market tendencies will be and how the software outsourcing industry will develop.
This year is no exception, but fortune-telling is not going to be easy. Though it's obvious that the global economy is in recovery after the downturn, reverberations are still being felt everywhere. As a result, the outsourcing industry remains between the scissors of enterprises' appetite for offshore projects and the continued cost-cutting that affects outsourcing contracts. Price, however, is no longer the prime concern in contract negotiation; business value, as well as the provider's flexibility, is increasingly seen as more important.
With relative stability, clients' interest in more sophisticated solutions has shown stable growth. Cloud computing, social communication and collaboration and context technologies seem to be mantra words for this year.
Of course, the complexity of outsourced tasks makes the demands for the provider even tougher.
The overall level of education, staff creativity and the ability to cope with unusual tasks has become as important in choosing a provider as productivity and price. Conceivably, the situation may well lead to more pronounced labour arbitrage between major outsourcing destinations, with some places focused on complex software engineering on one side, and huge software and BPO factories on the other. Efforts at protectionism by various governments who would prefer to see the full production cycle take place in their own countries can slow the process down but won't stop it.
At the same time, we can expect further mergers between Eastern providers and large Western service companies - partly as a way of reducing costs for western IT companies and partly as a way for them to access emerging markets. The latter factor is a tendency that will only grow more significant. Developing countries' service companies have already begun making sales at home, not just overseas, as domestic demand for their services has been steadily forming.
The face of the outsourcing industry is changing. Who can say what it will look like tomorrow? We can only work hard to keep it smiling!
Download PDF from Reksoft site
"What I call the generator of historical events is different from the events themselves, much as the minds of the gods cannot be read just by witnessing their deeds. You are very likely to be fooled about their intentions."
Nassim Nicholas Taleb, The Black Swan
Nassim Nicholas Taleb, The Black Swan
It's traditional at the beginning of a new year to try to predict the future, guessing what the defining market tendencies will be and how the software outsourcing industry will develop.
This year is no exception, but fortune-telling is not going to be easy. Though it's obvious that the global economy is in recovery after the downturn, reverberations are still being felt everywhere. As a result, the outsourcing industry remains between the scissors of enterprises' appetite for offshore projects and the continued cost-cutting that affects outsourcing contracts. Price, however, is no longer the prime concern in contract negotiation; business value, as well as the provider's flexibility, is increasingly seen as more important.
With relative stability, clients' interest in more sophisticated solutions has shown stable growth. Cloud computing, social communication and collaboration and context technologies seem to be mantra words for this year.
Of course, the complexity of outsourced tasks makes the demands for the provider even tougher.
The overall level of education, staff creativity and the ability to cope with unusual tasks has become as important in choosing a provider as productivity and price. Conceivably, the situation may well lead to more pronounced labour arbitrage between major outsourcing destinations, with some places focused on complex software engineering on one side, and huge software and BPO factories on the other. Efforts at protectionism by various governments who would prefer to see the full production cycle take place in their own countries can slow the process down but won't stop it.
At the same time, we can expect further mergers between Eastern providers and large Western service companies - partly as a way of reducing costs for western IT companies and partly as a way for them to access emerging markets. The latter factor is a tendency that will only grow more significant. Developing countries' service companies have already begun making sales at home, not just overseas, as domestic demand for their services has been steadily forming.
The face of the outsourcing industry is changing. Who can say what it will look like tomorrow? We can only work hard to keep it smiling!
Download PDF from Reksoft site