In a recent survey conducted by Alsbridge Inc., 67 percent of Tier 1 and 2 managed service providers agreed that 2010 is shaping up to be a better year for securing meaningful service contracts.
Alsbridge CEO Ben Trowbridge says the outsourcing landscape is changing dramatically but the signs are positive overall.
“The dust is finally settling,” says Trowbridge. “While we’ll see an uptick in outsourcing deals this year, our research reveals an entirely new landscape because of the increase in smaller, more nimble providers, a consolidation of larger players and emerging markets who are hungry for a seat at the outsourcing table,” Trowbridge adds.
The survey also revealed that while businesses are enjoying a stronger pipeline, there is less discretionary money to spend on long overdue improvements.
At mid-year, the survey reports these surprising trends:
- The strongest demand overall seems to be for Applications Outsourcing (AO) services. According to Trowbridge, this is “a surprising development given the maturity of that service area and the penetration of most of the providers surveyed into the Fortune 1000 client base for AO and Infrastructure Outsourcing.” Trowbridge adds, “More conservative companies who weathered the early 2000’s are now feeling the cost pressures of maintaining legacy applications portfolios and seek the assistance of knowledgeable support services providers to help them leapfrog the painful refresh and upgrade process.”
- Globalization is fueling change. As larger providers have consolidated, they have opened the door for smaller providers to enter the marketplace and become more competitive. Moreover, the service delivery horizon is expanding. A Duke University survey found that demand for outsourcing services is rapidly expanding across the world, with established and newcomers in the service delivery arena hiring a strong bench of new staff and investing in service infrastructure. The survey of more than 500 firms with offshore centers found that their expansion strategies are tied to the emergence of hundreds of smaller players selling into the same markets, primarily focused on Europe in 2010. The US and India have led the industry for a decade but are now seeing competition from companies in Latin America, Eastern Europe and Asia focused on all of the traditional outsourcing areas. Beyond the BRIC countries (Brazil, Russia, India, China,) developing nations such as Egypt and Poland are emerging as viable offshore labor markets.
- Outsourcing is more personal. “One of the more interesting trends is “person-to-person or P2P outsourcing.” Trowbridge explains, “Offshoring has now reached small businesses and the home cottage industry. Online tutoring, software development and translation services are just a few examples of the emergence of P2P.” According to a recent report by EvaluServe, revenue for this sector is expected to reach $300 million in 2008 and predicts the value of the P2P offshoring market will rise to more than $2B by 2015.
- For now, companies say they will still keep their feet on the ground and their head out of the ‘cloud’. This is evidenced by the fact that only eight percent of providers see a significant demand this year for cloud computing services with 30 percent seeing a small but sustainable rise, according to a survey released by the Alsbridge Outsourcing Leadership Summit held in early 2010.
“There’s no doubt that caution has taken precedence over competitiveness,” summarizes Trowbridge. “However, this is the time to invest in better processes and take a look at existing contracts so that your company is poised for growth as we continue to climb out of the slump,” Trowbridge concludes.
For more information on current buying trends download the full white paper, “Outsourcing 2010: What Are Your Competitors Buying?”
About Alsbridge
Alsbridge, Inc. is an award-winning global advisory firm that has redefined the way companies reduce costs and improve back office operations. Our proprietary benchmarking tools and data resources enable clients to utilize the most cost effective and value added sources globally for information technology, business processes and telecommunications networks. Through a combination of internal optimization and outsourcing, our clients achieve cost savings that support their strategic business objectives. Founded in 2003, Alsbridge is the proven, effective difference. The company’s web site is: http://www.alsbridge.com/
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