{"id":1747,"date":"2010-01-31T10:42:00","date_gmt":"2010-01-31T10:42:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/the-industry-speaks-part-iii-demand-for-outsourcing-is-reaching-new-heights-but-will-vendors-disappoint\/"},"modified":"2010-01-31T10:42:00","modified_gmt":"2010-01-31T10:42:00","slug":"the-industry-speaks-part-iii-demand-for-outsourcing-is-reaching-new-heights-but-will-vendors-disappoint","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/the-industry-speaks-part-iii-demand-for-outsourcing-is-reaching-new-heights-but-will-vendors-disappoint\/","title":{"rendered":"The Industry Speaks, Part III: Demand for outsourcing is reaching new heights, but will vendors disappoint?"},"content":{"rendered":"
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Wow… just look at that growth<\/p>\n<\/div>\n

Industry analysts are often accused of\u00a0hyping the market they cover, creating hockey-stick\u00a0growth projections\u00a0to get everyone excited and\u00a0avoiding ever reporting a worrying decline in growth.\u00a0\u00a0 I\u00a0just heard you gasp in shock and horror at this revelation…<\/strong><\/span><\/p>\n

So what do\u00a0you do when you’re\u00a0actually in a position to dust-off the old hockey-stick, last seen used adorning\u00a0a forecast for\u00a0online vacuum-cleaner<\/a>\u00a0parts\u00a0from \u201999, and slap it under a title such as “Outsourcing\u00a0spending to reach $250 Gazillion by 2016”?<\/p>\n

Which brings\u00a0us to the topic du jour<\/em>: what are customers intending to do this year with their outsourcing strategies?\u00a0 When we spoke to 1055 customers<\/a>, intermediaries and vendors across the global sourcing industry earlier this month, they gave us the real picture:<\/p>\n

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Figure 1: How 2010 will play out (from the customers\u2019 perspective)\u2026 IT Outsourcing reaching its peak and a banner-year for BPO likely<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\"Liklihood-to-buy\"This chart is revealing the dynamics of enterprises now looking to execute on plans to reduce costs and\u00a0drive change\u00a0into their business operations after hunkering down during the recession.<\/p>\n

The green represents where\u00a0customers are intending to initiate outsourcing for the first time, the\u00a0amber where they are intending to increase scope of existing outsourced processes, the red where they intend to pull-back scope, and the gray where they haven’t made any plans, or just intend to maintain their status quo.\u00a0 Let’s take a closer look…<\/p>\n

Applications and infrastructure:<\/strong>\u00a0 most larger firms have already\u00a0been using IT services vendors to deliver work in outsourced contracts for some time now, hence the relative small percentage of customers starting ITO for the first time.\u00a0 The notable trend here is the sheer magnitude – over 50% –\u00a0of firms intending to increase the scope of their existing IT outsourcing engagements.\u00a0 We’re already seeing significant revenue growth from several of the ITO\u00a0vendors over the last couple fo quarters, as they layer on work for customers.\u00a0 As we’ve discussed at length<\/a>, there’s still a lot of room for labor-arbitrage deals in the short-medium term, with 75% of ERP still being maintained and supported onshore.\u00a0 Hence 2010 will constitute something of a land-grab for the arbitrage work from the leading services vendors.\u00a0 The big question will be who wins the higher-value transformative work when the obvious<\/em> arbitrage opportunities eventually dry up<\/a>.<\/p>\n

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