The growing global potential of IT outsourcing

The growing global potential of IT outsourcing



By Robin Whitlock



www.millhousedata.com



As the government budget cuts tighten their grip, some people may ask whether there will be any effect on IT outsourcing. For the moment, the precise effect remains unclear yet according to The Daily Telegraph an increased reliance on outsourcing may already have begun.

As far as general outsourcing business is concerned, Serco announced a 20% rise in profits in August as a result of signing contracts earlier in the year worth some £2.2 billion. Serco’s business is non-IT related, but it may provide an indication of what will happen in the IT sector. Rachel Cooper writing in the paper in August commented that the government is increasingly expected to turn to the private sector to help alleviate the effect of public sector cuts. It seems that Serco is already in on the act being engaged in discussions with the cabinet office’s efficiency and reform group in order to identify areas where savings may be achieved. It’s still early days however, for instance analysts from JP Morgan Cazenove have stated that they believe real activity in this area will not be fully visible until 2011 when the first contracts are awarded.

The website Outsource Portfolio commented in January that outsourcing of application development is expected to fall as a result of a desire to keep time and cost overruns under control while management and maintenance outsourcing may increase because they are seen as cost-cutting measures. The website argues that the pattern of outsourcing will be influenced by capability and pricing and therefore increased caution will be displayed when choosing a suitable vendor. It also foresees an important role for Cloud Computing as a cost-cutting measure.

A recent post on the Epam-Systems blog refers to the growing prominence of Eastern Europe, Latin America and Asia in the outsourcing market which continues to expand its global potential. India and North America it seems are increasingly surrendering their lead. The movement of business away from the former outsourcing locations was revealed in a study conducted by Duke University’s Offshoring Research Network and Pricewaterhouse Coopers with PWC Managing Director Charles Aird observing that "Growing competition has transformed the outsourcing industry into a global race for market share." Meanwhile a report by global consulting and research firm Everest revealed an improvement in IT services outsourcing with a marked decrease in business process outsourcing.



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