11 Outsourcing Trends to Watch in 2011

Smaller contracts and hard lines on prices. Cloud-related commotion and back-door deals. Increased offshoring and decreased customer satisfaction. Happy New Year, outsourcers!

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8. China, Brazil, and Egypt Take Center Stage

"Buyers are growing more interested in offshore services delivered from locations other than India," says EquaTerra's Lepeak. And service providers will continue to shift their delivery centers to markets such as China, Brazil, and Egypt, and not simply to address issues such as wage inflation or staff attrition. They want a piece of the business in hot emerging markets. "Strong sourcing market growth will be in geographies with strong economies, led by Brazil, China, India and the Middle East," says Bendor-Samuel of Everest. "Countries with strong economies represent big markets with big demand for transformational and discretionary spend activity."

9. Protectionism Will Continue...With Limited Effect

It's practically inevitable with continued high U.S. unemployment levels that the new year will bring with it more proposals by American politicians that appear to limit the use of offshoring.

But any proposed protectionist legislation will be marked mostly by sound and fury. "Most of these measures will fail to gain traction and pass into law, and those that do will be difficult to implement and audit," says Bendor-Samuel.

The attention that such measures, successful or not, draw could put pressure on offshore companies to increase their onshore capabilities, Bendor-Samuel says. But they hardly need more impetus to do that (see prediction #7 above). Concerns about a tax on offshore call centers specifically could be an incentive to reduce call volumes through the use of more self-service and automation tools, says Compass's Mathers. But they hardly need more incentive to take more labor costs out of the outsourcing equation (see prediction #TK below).

10. Providers Embrace Mass Automation...

"It continues to become harder to turn a good profit as a third party service provider," notes EquaTerra's Lepeak. Pressure to keep costs down and rive performance up, outsourcers will rely more heavily on automation, says Rutchik of Pace Harmon, from optical character recognition to whole lights-out, employee-free delivery centers.

Providers will increasingly be slinging such automation tools as well. "Applications that reduce the labor a client is required to perform the services will be offered at lower implementation and running costs than they have in the past," says EquaTerra's Brown. "This will continue to create demand for additional opportunities and reduce the staff necessary to support critical business applications."

11. ...And Mass (Offshore) Migration

The internal corporate IT job isn't the only one expected to go the way of the dodo in coming years. IT enterprise customers arent the only Expect more vendors to make like HP and attack labor costs through layoffs and offshoring in 2011. "[HP] has emerged leaner and dramatically more price competitive, " says Bendor Samuel. "This increased competitiveness has already set off a chain reaction as competitors increasingly recognize the new competitive realities and move, in turn, to cut cost and match price." The easiest way to do that it to move large swaths of delivery personnel to lower cost locations. "This mass migration of work is and will further stretch offshore delivery capabilities, resulting in decreasing quality and communication problems," Bendor-Samuel predicts.


Copyright © 2010 IDG Communications, Inc.

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