Sure, you could hire a big, expensive outsourcing consulting firm to guide you step-by-step through the IT services procurement process. They've got experience, off-the-rack SLAs and contractual provisions, and enough templates and processes to fill a large conference room. But not everyone can or will pay $300-plus an hour for outsourcing handholding anymore.
The good news is that many IT organizations are capable of handling much of the process in-house. And such do-it-yourself outsourcing can pay off in ways beyond the bottom line, like a more flexible contract or a stronger relationship with the IT service provider. Read more
Oost-Europa, een lonkend alternatief
Ondanks de huidige economische recessie wordt over het algemeen aangenomen dat in Nederland een structureel tekort is aan goed opgeleide ict’ers. Tevens wordt aangenomen dat dit tekort zich niet oplost en alleen maar groter wordt. Er zijn ongeveer 250.000 ict’ers werkzaam in Nederland en bij een groei van 3 à 4 procent is er een jaarlijkse behoefte aan een toename van circa vijfduizend ict’ers. Dit aantal staat nog los van de compensatie van de uitstroom van ict’ers uit de arbeidsmarkt.
Read more: http://www.computable.nl/artikel/ict_topics/outsourcing/3148598/1276946/oosteuropa-een-lonkend-alternatief.html#ixzz0WYxSfVJU
Read more: http://www.computable.nl/artikel/ict_topics/outsourcing/3148598/1276946/oosteuropa-een-lonkend-alternatief.html#ixzz0WYxSfVJU
Westpac's Kelly says mega outsourcing trend is shifting
Westpac CEO Gail Kelly has broadly hinted that the bank is unlikely to renew its decade-long IT outsourcing deal with IBM, as banks move away from all-in-one mega deals to more tactical best-of-breed outsourcing arrangements.
Are there differences between nearshore versus offshore outsourcing?
The advantages of outsourcing software development to low cost countries are noticed by the market. But is there a difference between outsourcing software development to an offshore (far distance) country (outsourcing to far distance countries) then to a nearshore (relatively close) country?
According to some definitions is offshore a ‘business activity that is complex and risky because it involves working with a foreign, distant organization’ (www.wikipedia.org). In contrast to nearshore that is ‘understood to mean the business has reduced complexity and risk’. It is clear that in general the risk and complexity are greater between Western Europe countries and an offshore country like India due to geographical, political, historical and cultural differences than between a nearshore country like Serbia. This all comes down to communication between the business partners and especially the level of understanding of each other’s written, verbal and non-verbal communication.
In common practice you see that outsourcing software development to offshore countries requires quite heavily formal governance and management processes to mitigate the communication complexity and risk. Often the outsourcing party has setup, even for relative smaller software development projects, a significant team to manage, control and communicate with the offshore partner.
On the other side of the spectrum you see that outsourcing software development to nearshore countries requires much less stringent governance and management processes due to fact that communication is less complex and risky. Beside less governance and management, the physical distance between Western Europe and a nearshore country is closer and therefore easier to travel in case communication problems requires attention.
Therefore, the differences between nearshore and offshore outsourcing of software development are significant, mainly to mitigate complexity and risk of poor communication. Nearshore is, although slightly more expensive, a better choise for outsourcing of software development.
According to some definitions is offshore a ‘business activity that is complex and risky because it involves working with a foreign, distant organization’ (www.wikipedia.org). In contrast to nearshore that is ‘understood to mean the business has reduced complexity and risk’. It is clear that in general the risk and complexity are greater between Western Europe countries and an offshore country like India due to geographical, political, historical and cultural differences than between a nearshore country like Serbia. This all comes down to communication between the business partners and especially the level of understanding of each other’s written, verbal and non-verbal communication.
In common practice you see that outsourcing software development to offshore countries requires quite heavily formal governance and management processes to mitigate the communication complexity and risk. Often the outsourcing party has setup, even for relative smaller software development projects, a significant team to manage, control and communicate with the offshore partner.
On the other side of the spectrum you see that outsourcing software development to nearshore countries requires much less stringent governance and management processes due to fact that communication is less complex and risky. Beside less governance and management, the physical distance between Western Europe and a nearshore country is closer and therefore easier to travel in case communication problems requires attention.
Therefore, the differences between nearshore and offshore outsourcing of software development are significant, mainly to mitigate complexity and risk of poor communication. Nearshore is, although slightly more expensive, a better choise for outsourcing of software development.
Nederlandse software om trots op te zijn
Software is eigenlijk het centrale zenuwstelsel van de ict-industrie. Het zorgt voor de besturing van de ict-infrastructuur en van automatiseringssystemen en voor de werking van ontelbaar veel producten en diensten in alle mogelijke onderdelen van de economie. Het heeft ervoor gezorgd dat de manier waarop we leven, werken, studeren en recreëren spectaculair is veranderd. Het is de drijfveer van maatschappelijke verandering en verhoogde productiviteit en het is de motor van innovatie.
Read more: http://www.computable.nl/artikel/ict_topics/ictbranche/3007623/2379258/nederlandse-software-om-trots-op-te-zijn.html#ixzz0MjV5o9Jk
Read more: http://www.computable.nl/artikel/ict_topics/ictbranche/3007623/2379258/nederlandse-software-om-trots-op-te-zijn.html#ixzz0MjV5o9Jk
IT gaining business influence
UK boards are investing in IT innovation to drive their business out of recession.
Investment has dropped by only 7% in the past year, a European-wide survey of over 1,300 IT executives by recruitment firm Harvey Nash found.
"IT leaders must be proactive, aggressive cost-cutters and strategic implementers," said John Whiting.
He said it was encouraging that organisations are turning to the IT department to innovate their way to recovery.
Some 88% of UK respondents to the survey said they had achieved success by collaborating with other organisations to improve their innovation processes.
Achieving greater results on tighter budgets is likely to see the IT function rewarded with the strategic influence they desire, he said.
Investment has dropped by only 7% in the past year, a European-wide survey of over 1,300 IT executives by recruitment firm Harvey Nash found.
"IT leaders must be proactive, aggressive cost-cutters and strategic implementers," said John Whiting.
He said it was encouraging that organisations are turning to the IT department to innovate their way to recovery.
Some 88% of UK respondents to the survey said they had achieved success by collaborating with other organisations to improve their innovation processes.
Achieving greater results on tighter budgets is likely to see the IT function rewarded with the strategic influence they desire, he said.
10 Ways to Save Money on Your Current Outsourcing Contract IT executives in outsourcing relationships need to cut IT services costs now.
1. Enlist your service provider to identify cost-cutting opportunities.
2. Negotiate gold, silver and bronze service levels.
3. Reap the benefits of standardization and process maturity.
4. Increase the scope of the contract or extend the terms of the agreement.
5. Verify provider performance.
6. Opt for more offshore/nearshore delivery.
7. Turn down the volume.
8. Renegotiate some or all of the contract.
9. Exercise your right to audit, benchmark or walk away.
10. Get rid of bodyshopping
2. Negotiate gold, silver and bronze service levels.
3. Reap the benefits of standardization and process maturity.
4. Increase the scope of the contract or extend the terms of the agreement.
5. Verify provider performance.
6. Opt for more offshore/nearshore delivery.
7. Turn down the volume.
8. Renegotiate some or all of the contract.
9. Exercise your right to audit, benchmark or walk away.
10. Get rid of bodyshopping
Top Three Outsourcing Initiatives for 2009
1. Reviewing Deal Structures
Most current outsourcing deals and models are outdated and ineffective because they are people-based and not demand-based. Companies have a need for resources to do the work that is required; they negotiate a rate with a vendor; and determine contract durations. The contracts primarily follow a simple model: People x Rates x Duration.
2. Portfolio Rationalization
Portfolio rationalization has been one of the biggest trends in the application outsourcing market over the past two to three years. The industry has matured to a point where CIOs can now review their portfolio of outsourcing partners and set themselves up with better mixes of companies, countries and models. This is not an easy task, since every company is different and there is no cookie-cutter approach to finding the right mix of outsourcing partners.
3. Cost-Cutting
The combination of hard economic times and the maturity of the outsourcing industry will force and enable CIOs to find new ways of cost-cutting. It is important to realize that there is no silver bullet on cost-cutting and it is equally important to understand that the biggest levers for cost-cutting are not the rates themselves.
How can CIOs cut costs with their outsourcing initiatives?
Offshore to Onsite Ratios—this is by far the biggest lever in reducing the total cost of ownership of an application or suite of applications. The more roles that can be moved offshore, the more money can be saved. The industry benchmark is 80:20 (80 percent of resources offshore and 20 percent onsite), but most companies flounder with "fat" models and have too many people onsite. With mature processes and governance, there is no reason 90:10 cannot be the new benchmark. Plus, outsourcing companies make more money on offshore resources, so they will be eager to help CIOs reduce costs with better offshore-to-onsite ratios.
Time-to-Market—if products and applications can be delivered faster, companies will reap the benefits sooner. To do this, IT organizations must work with their outsourcing partners on better ways to execute projects, leverage reusable components and foster knowledge-sharing.
Quality Improvements—if products and applications can be delivered with fewer bugs and defects there will be less time and money spent on re-works. IT organizations must leverage the knowledge, experience, tools and processes of outsourcing companies.
Productivity Improvements—productivity is married-at-the-hip to the outsourcing model being deployed between the company and the vendor. If companies embrace the demand-based models depicted earlier, real productivity gains will follow because outsourcing companies will be forced to increase productivity to control costs.
Most current outsourcing deals and models are outdated and ineffective because they are people-based and not demand-based. Companies have a need for resources to do the work that is required; they negotiate a rate with a vendor; and determine contract durations. The contracts primarily follow a simple model: People x Rates x Duration.
2. Portfolio Rationalization
Portfolio rationalization has been one of the biggest trends in the application outsourcing market over the past two to three years. The industry has matured to a point where CIOs can now review their portfolio of outsourcing partners and set themselves up with better mixes of companies, countries and models. This is not an easy task, since every company is different and there is no cookie-cutter approach to finding the right mix of outsourcing partners.
3. Cost-Cutting
The combination of hard economic times and the maturity of the outsourcing industry will force and enable CIOs to find new ways of cost-cutting. It is important to realize that there is no silver bullet on cost-cutting and it is equally important to understand that the biggest levers for cost-cutting are not the rates themselves.
How can CIOs cut costs with their outsourcing initiatives?
Offshore to Onsite Ratios—this is by far the biggest lever in reducing the total cost of ownership of an application or suite of applications. The more roles that can be moved offshore, the more money can be saved. The industry benchmark is 80:20 (80 percent of resources offshore and 20 percent onsite), but most companies flounder with "fat" models and have too many people onsite. With mature processes and governance, there is no reason 90:10 cannot be the new benchmark. Plus, outsourcing companies make more money on offshore resources, so they will be eager to help CIOs reduce costs with better offshore-to-onsite ratios.
Time-to-Market—if products and applications can be delivered faster, companies will reap the benefits sooner. To do this, IT organizations must work with their outsourcing partners on better ways to execute projects, leverage reusable components and foster knowledge-sharing.
Quality Improvements—if products and applications can be delivered with fewer bugs and defects there will be less time and money spent on re-works. IT organizations must leverage the knowledge, experience, tools and processes of outsourcing companies.
Productivity Improvements—productivity is married-at-the-hip to the outsourcing model being deployed between the company and the vendor. If companies embrace the demand-based models depicted earlier, real productivity gains will follow because outsourcing companies will be forced to increase productivity to control costs.
IBM attempts to make offshoring easier
Last week IBM issued a patent application for an offshore outsourcing methodology that is aimed to help companies minimize the risks associated with sending work overseas.
This application describes a computer-driven approach that values both the quantitative and qualitative attributes of a “global resource sourcing strategy”. The methodology considers language skills and morale of offshore staff as well as a list of hard numbers of setting up offshore operations.
In fact, IBM intends to reduce concerns associated with offshore operations to a mathematic model, and to create an unified application that can be a reusable sourcing template for identifying and analyzing global resources.
The company recently submitted the application to the U.S. Patent & Trademark Office, it couldn’t be better time for “Big Blue” as in the same day the company announced that it is eliminating more jobs in its North American operations.
Alliance@IBM has said it expects up to 5,000 workers to be laid off. The union associates it with a plan by IBM to move more jobs overseas.
In turn, IBM claims that its methodology allows decision-makers to conveniently trade off one or more qualitatively defined levels between one or more factors in terms of quantifiable costs. It is also explains why its so important to look at a broad range of variables when making global sourcing decisions. By simply looking at wages and material costs, "the organization may indirectly increase other costs such as those associated with poorer quality workers and/or materials," IBM said. That could include loss of customers, lower productivity, increased product returns and higher worker attrition, the company said, adding that a company "needs to consider both direct and indirect costs associated with its resources."
This isn't the first time when IBM has filed for a patent related to an offshoring methodology. An application filed in 2007 described a software-driven approach "for identifying at least a portion of a human-resource within an organization for outsourcing."
This application describes a computer-driven approach that values both the quantitative and qualitative attributes of a “global resource sourcing strategy”. The methodology considers language skills and morale of offshore staff as well as a list of hard numbers of setting up offshore operations.
In fact, IBM intends to reduce concerns associated with offshore operations to a mathematic model, and to create an unified application that can be a reusable sourcing template for identifying and analyzing global resources.
The company recently submitted the application to the U.S. Patent & Trademark Office, it couldn’t be better time for “Big Blue” as in the same day the company announced that it is eliminating more jobs in its North American operations.
Alliance@IBM has said it expects up to 5,000 workers to be laid off. The union associates it with a plan by IBM to move more jobs overseas.
In turn, IBM claims that its methodology allows decision-makers to conveniently trade off one or more qualitatively defined levels between one or more factors in terms of quantifiable costs. It is also explains why its so important to look at a broad range of variables when making global sourcing decisions. By simply looking at wages and material costs, "the organization may indirectly increase other costs such as those associated with poorer quality workers and/or materials," IBM said. That could include loss of customers, lower productivity, increased product returns and higher worker attrition, the company said, adding that a company "needs to consider both direct and indirect costs associated with its resources."
This isn't the first time when IBM has filed for a patent related to an offshoring methodology. An application filed in 2007 described a software-driven approach "for identifying at least a portion of a human-resource within an organization for outsourcing."
Can (Offshore) Outsourcing Vendors Innovate?
For quite a while, every outsourcing service provider has cited lower costs as a reason to outsource--the latest "news" is innovation as their key differentiators. But, what is their definition of "innovation"?
March 23, 2009 — CIO — I once heard someone say (actually that someone happened to be me!), "Offshore Outsourcing is dead!" But before you jump off your seat, let me clarify what I mean by dead. I mean dead not with reference to its importance, relevance or future; I mean dead with reference to its character—it is devoid of vibrancy, excitement, creation and innovation.
March 23, 2009 — CIO — I once heard someone say (actually that someone happened to be me!), "Offshore Outsourcing is dead!" But before you jump off your seat, let me clarify what I mean by dead. I mean dead not with reference to its importance, relevance or future; I mean dead with reference to its character—it is devoid of vibrancy, excitement, creation and innovation.
16 Ways IT Can Do Less with Less
Tough times call for tough measures. Layoffs and cutbacks are rampant. Even if your IT budget is relatively stable, you will probably be asked to do more with less. Read what CIO.com has to say about it.
Feel also free to call us and we will reduce your IT spend with over 30% without "doing less".
Feel also free to call us and we will reduce your IT spend with over 30% without "doing less".
IT Outsourcing in Central and Eastern Europe 2009
The alignment of forces in Global Outsourcing Industry will change, there is no doubt about it. There is some dominant reasons further to big changes:
- Current economic crisis swept the global markets and already hit the IT industries around the world. In this tough environment organizations have to carefully weigh all benefits and risks of sending work to outsourcing providers as well as once again reexamine what might be outsourced and what should stay in-house.
- Recent scandals in Indian IT outsourcing markets where service providers are losing their advantage against global competitors for providing IT outsourcing services as customer satisfaction levels fall (satisfaction with Satyam declined 15%, TCS dropped 8% and Wipro fell 4%)
- Europe has a record number of contracts were signed during last year and finally outruns US for outsourcing deals in 2008, despite a 50 per cent fall in the value of deals in the second half of the year
- Recent Gartner's report of TOP30 outsourcing destinations claims that BRIC (Brazil, Russia, India and China) dominated as offshore leaders in 2008, but it has also marked the rise of new outsourcing destinations as well as well scoring of CEE countries. Because of India's higher IT staff turnover and recent horror stories companies are choosing offshore providers in Eastern Europe where language skills are better and outsourcing providers appear to have a more in-depth understanding of their clients than competitors farther east.
Partially or entirely, all those facts strengthened positions of Central and Eastern Europe region as a major player in the global IT outsourcing market in terms of market volume, the number of IT professionals and IT companies offering outsourcing services. Increasing demand of Nearshoring services is also caused by a general interest of EU companies in entering to the CEE market with a desire to cut costs by using local outsourcing resources during an entrance.
Indeed, CEE countries are still more expensive compared to their Asian competitors such as India or China. However, Gartner's outsourcing report claims that recent EU entrants Slovakia and Romania, together with Russia and Ukraine were scored well on cost grounds and the CEE region whilst far from homogenous, enjoys close geographical and cultural links, particularly with the Western European markets.
Although the country (Eastern Europe) currently taking third place after India and China, it promises to rise up in near future with such attractive offshore work centers as Russia, Ukraine, Czech Republic, Poland, Romania, Belarus and the Baltic. These destinations not only offer low cost skilled labor force, but also an attractive regulatory environment with a close proximity and cultural ties to Western Europe and US. The other advantages of moving to Eastern Europe offshore markets are connected to its political stability, while India has an ongoing conflict with Pakistan and Sri Lanka.
Eastern Europe has highly efficient school system that adds thousands of skilled labor every year to its professionals, for example The Soviet Union's solid legacy in the fundamental sciences provides students with a strong education in numerous technical disciplines. According to the GoalEurope, there are 30,000 IT graduates only in Ukraine every year. With government commitment to the industry there is highly skilled labor force with minimal socio-cultural differences found in CEE countries.
As quality becomes more important during this recessionary times and outsourcing is not Just a Way to Cut Costs Anymore, customer wants to get better business processes from outsourcing providers in order to increase customer satisfaction and save more money. It requires from outsourcing providers more in-depth understanding of their clients along with ability to go beyond the traditional outsourcing services.
- Current economic crisis swept the global markets and already hit the IT industries around the world. In this tough environment organizations have to carefully weigh all benefits and risks of sending work to outsourcing providers as well as once again reexamine what might be outsourced and what should stay in-house.
- Recent scandals in Indian IT outsourcing markets where service providers are losing their advantage against global competitors for providing IT outsourcing services as customer satisfaction levels fall (satisfaction with Satyam declined 15%, TCS dropped 8% and Wipro fell 4%)
- Europe has a record number of contracts were signed during last year and finally outruns US for outsourcing deals in 2008, despite a 50 per cent fall in the value of deals in the second half of the year
- Recent Gartner's report of TOP30 outsourcing destinations claims that BRIC (Brazil, Russia, India and China) dominated as offshore leaders in 2008, but it has also marked the rise of new outsourcing destinations as well as well scoring of CEE countries. Because of India's higher IT staff turnover and recent horror stories companies are choosing offshore providers in Eastern Europe where language skills are better and outsourcing providers appear to have a more in-depth understanding of their clients than competitors farther east.
Partially or entirely, all those facts strengthened positions of Central and Eastern Europe region as a major player in the global IT outsourcing market in terms of market volume, the number of IT professionals and IT companies offering outsourcing services. Increasing demand of Nearshoring services is also caused by a general interest of EU companies in entering to the CEE market with a desire to cut costs by using local outsourcing resources during an entrance.
Indeed, CEE countries are still more expensive compared to their Asian competitors such as India or China. However, Gartner's outsourcing report claims that recent EU entrants Slovakia and Romania, together with Russia and Ukraine were scored well on cost grounds and the CEE region whilst far from homogenous, enjoys close geographical and cultural links, particularly with the Western European markets.
Although the country (Eastern Europe) currently taking third place after India and China, it promises to rise up in near future with such attractive offshore work centers as Russia, Ukraine, Czech Republic, Poland, Romania, Belarus and the Baltic. These destinations not only offer low cost skilled labor force, but also an attractive regulatory environment with a close proximity and cultural ties to Western Europe and US. The other advantages of moving to Eastern Europe offshore markets are connected to its political stability, while India has an ongoing conflict with Pakistan and Sri Lanka.
Eastern Europe has highly efficient school system that adds thousands of skilled labor every year to its professionals, for example The Soviet Union's solid legacy in the fundamental sciences provides students with a strong education in numerous technical disciplines. According to the GoalEurope, there are 30,000 IT graduates only in Ukraine every year. With government commitment to the industry there is highly skilled labor force with minimal socio-cultural differences found in CEE countries.
As quality becomes more important during this recessionary times and outsourcing is not Just a Way to Cut Costs Anymore, customer wants to get better business processes from outsourcing providers in order to increase customer satisfaction and save more money. It requires from outsourcing providers more in-depth understanding of their clients along with ability to go beyond the traditional outsourcing services.
The 25 Most Dangerous Cities for Offshore Outsourcing
The pressure to reduce costs are increasing but where to outsource?
If you have an outsourcing contract for work in Bogota, Colombia, Bangkok, Thailand, or Johannesburg, South Africa, you should be aware that they rank as the riskiest offshore outsourcing destinations in the world. Locations in India and Brazil also made this inauspicious list. Where do you outsource?
After a year that saw terrorist attacks in Mumbai, kidnapping for profit in Mexico, and the unexpected meltdown of Satyam, one of India's biggest IT services firms, corporate America's cries for the CIO to get things done "better, faster, cheaper" offshore may begin to be drowned out by the more moderate mantra of today's outsourcing customer: "safer, more stable, more secure."
Eastern Europe is growing quite rapidly as the best destination.
If you have an outsourcing contract for work in Bogota, Colombia, Bangkok, Thailand, or Johannesburg, South Africa, you should be aware that they rank as the riskiest offshore outsourcing destinations in the world. Locations in India and Brazil also made this inauspicious list. Where do you outsource?
After a year that saw terrorist attacks in Mumbai, kidnapping for profit in Mexico, and the unexpected meltdown of Satyam, one of India's biggest IT services firms, corporate America's cries for the CIO to get things done "better, faster, cheaper" offshore may begin to be drowned out by the more moderate mantra of today's outsourcing customer: "safer, more stable, more secure."
Eastern Europe is growing quite rapidly as the best destination.
Krediet crisis; ict krijgt meer voor minder
Met een feestelijke CIO verkiezing nog vers in het geheugen is het contrast met de realiteit van alle dag groot. Lees verder
India losing its advantage in outsourcing
Indian IT service providers are losing their advantage against global competitors for providing IT outsourcing services as customer satisfaction levels fall. Satisfaction with Satyam declined 15%, TCS dropped 8% and Wipro fell 4%. Source http://www.computerweekly.com/
Less money-saving, more time-saving – Outsourcing Not Just a Way to Cut Costs Anymore
Companies are increasingly considering outsourcing as a time-saving tool for their core business processes during this recessionary times. So far, outsourcing was considered by the most as the money-saver in the first place and customers were happy to take a 20 per cent cost takeout from outsourcing deal. But today customer can take a 20 per cent cost takeout by reducing salary of his employees who will accept it just to save their jobs.
Today some see new slogan for outsourcing - efficiency, where customer wants to get better business processes from outsourcing providers in order to increase customer satisfaction and save more money.
One example of such modernization according to Suresh Vaswani, CEO of IT business at Wipro is to stream a company's collection process and cutting the time taken to bill clients. That reduction completely changes the game so far as the cash situation of the customer is concerned, and cash is king today.
Providing customers with modern systems such as client-oriented ERP/CRM platforms will allow them to control clients businesses better, cut the time for servicing, billing and optimize cash flow.
“But to do that company’s IT has to be adequately enabled, otherwise the processes cannot be changed appropriately” - stressed Vaswani.
Although outsourcing trends may change with this changing environment and outsourcing might acquire new watchword, businesses will continue to consider outsourcing as a main tool for cost-cutting and seek benefits from cheaper deals.
Today some see new slogan for outsourcing - efficiency, where customer wants to get better business processes from outsourcing providers in order to increase customer satisfaction and save more money.
One example of such modernization according to Suresh Vaswani, CEO of IT business at Wipro is to stream a company's collection process and cutting the time taken to bill clients. That reduction completely changes the game so far as the cash situation of the customer is concerned, and cash is king today.
Providing customers with modern systems such as client-oriented ERP/CRM platforms will allow them to control clients businesses better, cut the time for servicing, billing and optimize cash flow.
“But to do that company’s IT has to be adequately enabled, otherwise the processes cannot be changed appropriately” - stressed Vaswani.
Although outsourcing trends may change with this changing environment and outsourcing might acquire new watchword, businesses will continue to consider outsourcing as a main tool for cost-cutting and seek benefits from cheaper deals.
Europe beats US in the number of outsourcing deals but anticipates slowdown during recessionary times
Recent report from TPI shows that Europe finally outruns US for outsourcing deals but sees a slowdown during recessionary times. There were a record number of outsourcing contracts signed by European companies during 2008 despite a 50 per cent fall in the value of deals in the second half of the year, and only one significant mega deal signed during the 3rd quarter.
Worldwide, IT outsourcing deals were worth up to €72bn which is more 5.6 per cent than those signed in 2007. The number of contracts in Europe rose by 17 per cent year on year and for the first time Europe outruns the US with 55 per cent of signed deals, compared to just 32 per cent in the US. The number of European deals hit 271, compared to 243 across the Atlantic.
According to Duncan Aitchison, president of TPI research company, such high results were achieved mainly because of the strong first half and in particular through the level of mega-deal activity in the region, which awarded two-thirds of the world's $1bn-plus contracts last year.
But as the global crisis hit hard business in Europe fell by 50 per cent in the second half of the year and the value of contracts awarded in Europe dropped significantly. According to the report new outsourcing contracts in Europe fell from 75 to 56 in the 2nd to 3rd quarter of this year with total contract value decreasing from US$18.5 billion to US$5.5 billion and that weakness continued into the fourth quarter, and looks likely to remain into the first part of 2009.
Aitchison claimed that the outsourcing market will have to rely on smaller deals to maintain its growth in 2009. In the past couple of years the mega deal has been consigned by many to the outsourcing scrap heap in favour of multi sourcing that is choosing separate suppliers for different processes. This has allowed smaller, more specialised service providers to step into the limelight. However, with the focus moving back onto cost as the main deciding factor in outsourcing, having one outsourcing supplier will minimise management, due diligence and supplier selection costs. It should also provide the end user with savings achieved by buying in bulk. So maybe we are seeing a pause as mega deals, generally, take some time to set up.
As more and more organisations come to grips with the credit crunch, we will see outsourcing move to the top of the boardroom agenda. Outsourcing has always been associated with cost savings and now with all companies setting aggressive cost saving targets for next year we may see more and more outsourcing contracts come to fruition.
Worldwide, IT outsourcing deals were worth up to €72bn which is more 5.6 per cent than those signed in 2007. The number of contracts in Europe rose by 17 per cent year on year and for the first time Europe outruns the US with 55 per cent of signed deals, compared to just 32 per cent in the US. The number of European deals hit 271, compared to 243 across the Atlantic.
According to Duncan Aitchison, president of TPI research company, such high results were achieved mainly because of the strong first half and in particular through the level of mega-deal activity in the region, which awarded two-thirds of the world's $1bn-plus contracts last year.
But as the global crisis hit hard business in Europe fell by 50 per cent in the second half of the year and the value of contracts awarded in Europe dropped significantly. According to the report new outsourcing contracts in Europe fell from 75 to 56 in the 2nd to 3rd quarter of this year with total contract value decreasing from US$18.5 billion to US$5.5 billion and that weakness continued into the fourth quarter, and looks likely to remain into the first part of 2009.
Aitchison claimed that the outsourcing market will have to rely on smaller deals to maintain its growth in 2009. In the past couple of years the mega deal has been consigned by many to the outsourcing scrap heap in favour of multi sourcing that is choosing separate suppliers for different processes. This has allowed smaller, more specialised service providers to step into the limelight. However, with the focus moving back onto cost as the main deciding factor in outsourcing, having one outsourcing supplier will minimise management, due diligence and supplier selection costs. It should also provide the end user with savings achieved by buying in bulk. So maybe we are seeing a pause as mega deals, generally, take some time to set up.
As more and more organisations come to grips with the credit crunch, we will see outsourcing move to the top of the boardroom agenda. Outsourcing has always been associated with cost savings and now with all companies setting aggressive cost saving targets for next year we may see more and more outsourcing contracts come to fruition.
How to Make Offshore Outsourcing Deals Withstand Crisis Situations
The Satyam fiasco. Economic recession and budget cuts. These 5 tips will help IT departments create effective contingency plans to transfer services back in house or to another service provider when the unexpected happens.
Without taking decisive action, IT executives expose their organizations to increased risk. Government policies, currency exchange rates, vendor performance, or any force that disrupts the status quo—can seriously impact the delivery of contracted services. IT organizations can best prepare now to create competitive advantage and to avoid unnecessary risks.
Critical strategic changes include the following five actions:
1. Diversifying the types of vendors, emphasizing smaller, specialized providers that offer more customized solutions and better executive access
2. Consolidating service providers to a handful of manageable relationships while continuously measuring the effectiveness and efficacy of each contract.
3. Rationalizing service providers rapidly during merger or acquisition rather than letting stale agreements linger, increasing risk and undermining cost reduction goals.
4. Developing transition plans in case a vendor fails to perform according to the contract or otherwise becomes an unattractive partner.
5. Ensuring the integrity of people, both internally and with the service provider, through effective and personalized human capital management.. Read more
Without taking decisive action, IT executives expose their organizations to increased risk. Government policies, currency exchange rates, vendor performance, or any force that disrupts the status quo—can seriously impact the delivery of contracted services. IT organizations can best prepare now to create competitive advantage and to avoid unnecessary risks.
Critical strategic changes include the following five actions:
1. Diversifying the types of vendors, emphasizing smaller, specialized providers that offer more customized solutions and better executive access
2. Consolidating service providers to a handful of manageable relationships while continuously measuring the effectiveness and efficacy of each contract.
3. Rationalizing service providers rapidly during merger or acquisition rather than letting stale agreements linger, increasing risk and undermining cost reduction goals.
4. Developing transition plans in case a vendor fails to perform according to the contract or otherwise becomes an unattractive partner.
5. Ensuring the integrity of people, both internally and with the service provider, through effective and personalized human capital management.. Read more
Satyam's $1-billion fraud shakes India
Outsourcing giant Satyam's chief Ramalinga Raju admits to posting fake profits for years. It is unclear how the fraud went undetected, but analysts don't expect an industry-wide fallout.
The son of farmers leaves his village behind, moves up from textile mills to real estate to IT outsourcing for multinational firms. He emerges as one of India's wealthiest and most famous entrepreneurs -- until he reveals that his empire was floating on an accounting lie and it all comes crashing down.
The U.S. has its Wall Street meltdown and the Bernard Madoff investment scandal. India has Ramalinga Raju, who appears to have perpetrated the nation's largest corporate scandal in recent memory.
The son of farmers leaves his village behind, moves up from textile mills to real estate to IT outsourcing for multinational firms. He emerges as one of India's wealthiest and most famous entrepreneurs -- until he reveals that his empire was floating on an accounting lie and it all comes crashing down.
The U.S. has its Wall Street meltdown and the Bernard Madoff investment scandal. India has Ramalinga Raju, who appears to have perpetrated the nation's largest corporate scandal in recent memory.
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