Changing trends in IT outsourcing!

If year 2008 was the year of collapse, year 2009 brought many changes to IT world functioning. On the one had we saw few IT biggies utilizing their cash reserves to buy similar size companies or to enter into completely new domain like Oracle acquiring Sun Microsystems, which will gain them entry into IT hardware domain and fine tune their software offerings according to Sun platform, HP acquired EDS to strengthen its software services offerings expanding its portfolio from traditional hardware/storage offerings, Dell’s acquisition of Perotsystems came as surprise to many analysts, since the company was already struggling to maintain its hold on serves market and instead of strengthening its bleeding line of business, they decided to enter into lucrative services market, which can ensure them a better .

On the other hand we also saw companies disintegrating their business units to focus on the core expertise, where we saw IT giant IBM quitting PC& servers business and latest in this series is Bearingpoint. We also saw the biggest IT consumer market, USA, taking some ‘protectionism’ measures to safeguard their domestic interest.

So how did this change IT outsourcing?

The answer isn’t simple. We saw biggies campaigning for ‘single window solutions’ to the customers comprising hardware/software/networking solutions under one umbrella. We also saw IT services biggies like TCS, Infosys giving discounts to retain customers in tough economic times and customers cutting-short their vendor list for the ease of manageability and reduce costs by giving bulk order and signing long-term deals. So is it the only impact, not really, we have seen some interesting trend change this time compare to last downturn post in 9/11. Let’s look at some important shift in IT outsourcing trends post economic downturn in 2008/2009:

Near-shore outsourcing: This has emerged as a new trend with political lobby campaigning in favor of boosting domestic employment or insisting on having relation with culturally similar countries. Brazil’s growth in IT/ITES market is a perfect example of near-shore outsourcing.

Cultural phenomenon: We have to admit that the race factor has never been such strong since post cold war, but the economic downturn has infected the racial harmony of the world. This has ofcourse resulted in the shift of people’s mindset and companies have sensed the customer’s preference to speak to a ‘culturally similar’ support professional especially in ITES sector. We saw Philippines taking over India in BPO growth which has cultural links with Americans.

Cost-factor: This isn’t a new trend, but has surely some new impact of economic meltdown. We saw companies like Microsoft and IBM offering financing solutions to help reduce the CAPEX burden of customers and offer them a spread payment option.

On-shore than off-shore: There is huge shift in the working model of IT companies especially due to ever increasing political pressure and strict visa restrictions, which has resulted in more on-shore outsourcing than off-shore outsourcing. Govt. has offered incentives to the companies for employing people locally than sending the work abroad. This has resulted in IT biggies setting-up development centers in the countries, where their customers belong to and employ local staff.

Reduced Sub-contracting: Most of the big IT consumer markets work on a sub-contracting model for the ease of management of staff and flexibility. We have see a big shift in the policy of IT/ITES biggies like IBM & Infosys and Genpact announcing cut in sub-contracting work, so that they can keep the cost under wrap and pass the cost benefit to customers.

Local than global: The most important shift in attitude of customers, they want the service provider on their doorstep, which they can see, meet and escalate matters to avoid any embarrassing situation, if the problem prolongs.