Outsourcing – what continues and what trends are emerging?

Outsourcing which was booming over last 10 years had slowed down over past 2 years, starting 2008 due to financial and economic downturns. But it’s picking steam again. 2009 and 2010 was not a growth year for many organizations and the economic downturn and the weakening U.S. dollar has inspired some companies to move their outsourced work back to the domestic arena. Even though Federal govt is providing incentives to keep jobs home, in long run companies will have not option but to outsource a good chunk of work to be globally competitive.

Continuing Trends
Companies are more than ever struggling to reduce and control operating costs, which is forcing them to continue to outsource. Tech integration sector is booming as you can tell by growing revenues of Big 4 Indian Consulting firms – TCS, Wipro, Infosys and Cognizant. India’s revenue from back-office outsourcing is expected to surge nearly five-fold to $50 billion by 2012, per Reuters. Areas which will continue to grow include:

  • Web Application Development
  • BPO/Call Center
  • Application Maintenance
  • Manufacturing, especially in semiconductor industry

What are the Future trends?
Service-providers/Outsourcers are beginning to focus on building capabilities like ones below, partly because that’s the future and clients are demanding for it.

  • Cloud Computing – many client expect to adopt Cloud Computing in the near future and want Cloud provisions written into outsourcing contracts
  • Mobile Development/Smartphone applications
  • Green IT – Federal government and Fortune 500 companies are promoting higher emphasis on socially responsible business environments, driving outsourcers to create solutions that address them
  • Healthcare – Changes in U.S. law will stimulate growth in healthcare outsourcing. Payors and providers are realizing they lack the personnel, expertise, or facilities to manage applications that have to be on continuously and that have to comply with newly strengthened privacy and security regulations
  • Service Quality, Value for Money and Flexibility– Global uncertainty and customers’ desire for immediate and guaranteed cost savings will lead companies to seek shorter outsourcing contracts that give them the ability to adjust volume and service level terms. Outsourcers will have to adapt to organizations’ changing needs and help the generate immediate savings
  • Management Consultancy – organizations are looking for service providers beyond IT to help them in crafting Business and IT strategy. This is one area where outsourcers will have to build significant capabilities
  • Virtualization

CIO.com has an excellent article on Outsourcing Trends to watch for in 2011.

Bottomline, outsourcing will continue to grow and the service-providers will be expected to do more by rounding out their skills and capabilities.

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