Posted by Mark Brousseau
Given the slow economic recovery, outsourcing hit a plateau for most industries in 2010, though there were a few important bright spots, including financial services, which witnessed a number of large IT deals, and also the travel industry, as more hotel chains sourced their key technology functions, according to research from law firm Morrison & Foerster.
Following are a few highlights from Morrison & Foerster’s research:
... Market uncertainty continues: nagging high unemployment and near-bankruptcies of some European countries have left companies unsure about the value of entering into long-term outsourcing arrangements.
... As Business Process Outsourcing picks up, companies will increasingly demand innovation from providers, hoping to ensure more long-term and embedded value in the sourcing relationship. “Successful innovation can have a multiplier effect which can lead to increased savings going forward,” the report says.
... Cloud computing has become the biggest money-saving sourcing tool – but privacy concerns have generated industry-specific “private clouds.” Morison Foerster expects the development of a new niche market devoted exclusively to cloud computing security.
... Financial services bounced back in 2010 due to large restructurings and the adoption of outsourcing by middle market institutions. Regulators’ close watch on the industry means banks and insurance companies will insist on stable and creditworthy sourcing providers – who might even be called upon to assume responsibility for system failures at banks. Financial services outsourcing should also get a boost from implementation of the Basel II and III and Solvency II international finance accords.
... Heathcare and pharma deals hardly budged in 2010 but the new U.S. healthcare legislation should spur activity in the near future.
... As the recession eases and short-term cost-cutting is replaced by a longer outlook, “green IT” will become more popular, driven by corporate social responsibility agendas, government requirements, and bottom-line savings. More companies are holding sourcing service providers to green standards of energy efficiency and minimizing waste.
... In the U.S., a significant exception to outsourcing’s relatively tepid performance in 2010 was Legal Process Outsourcing, which law firms are adopting at an unprecedented rate. Further, the types of work being outsourced continues to increase in complexity and sophistication, suggesting a rosy future for LPO – something investors and other strategic buyers have noticed.
How do these findings compare to what you are seeing in the market?
Showing posts with label offshore. Show all posts
Showing posts with label offshore. Show all posts
Wednesday, January 19, 2011
Tuesday, September 1, 2009
Choosing the Right Outsourced Services Provider
By Mark Brousseau
What distinguishes a quality outsourced services provider from the also-rans? According to Nancy Gessmann, senior vice president, Enterprise Solutions, for CDS Global (ngessmann@cds-global.com), a key factor is that they are constantly looking for ways to improve or enhance their clients’ business processes.
“Quality outsource providers understand and embrace the business needs of their customers. They are always on the lookout for value-added services and process improvements to help their clients,” Gessmann tells me. “These providers partner with their clients to become an extension of their business. They also reinvest in themselves and their clients’ processes, in turn, helping to grow the business.”
Gessmann adds that a good outsourcing partner should have at least a high-level understanding of a client’s business and their work processes. “There are some processes that don’t necessarily require an in-depth level of understanding, such as repeatable processes,” she says. “But with the right outsource provider, the outsourced services should be invisible to your customer or your customer’s customer.”
And there will be some business processes that an outsource provider may be better suited to fulfilling than your in-house operations, she said, noting an outsource provider might have advanced technology.
Other attributes Gessmann says companies should look for in an outsourcing partner include:
... Financial stability
... Staff experience and expertise
... Best of breed operational and technology systems
What do you think?
What distinguishes a quality outsourced services provider from the also-rans? According to Nancy Gessmann, senior vice president, Enterprise Solutions, for CDS Global (ngessmann@cds-global.com), a key factor is that they are constantly looking for ways to improve or enhance their clients’ business processes.
“Quality outsource providers understand and embrace the business needs of their customers. They are always on the lookout for value-added services and process improvements to help their clients,” Gessmann tells me. “These providers partner with their clients to become an extension of their business. They also reinvest in themselves and their clients’ processes, in turn, helping to grow the business.”
Gessmann adds that a good outsourcing partner should have at least a high-level understanding of a client’s business and their work processes. “There are some processes that don’t necessarily require an in-depth level of understanding, such as repeatable processes,” she says. “But with the right outsource provider, the outsourced services should be invisible to your customer or your customer’s customer.”
And there will be some business processes that an outsource provider may be better suited to fulfilling than your in-house operations, she said, noting an outsource provider might have advanced technology.
Other attributes Gessmann says companies should look for in an outsourcing partner include:
... Financial stability
... Staff experience and expertise
... Best of breed operational and technology systems
What do you think?
Wednesday, October 15, 2008
The Economy and Outsourcing
Posted by Mark Brousseau
Outsourcing Shops Feel the Street's Pain
Info tech spending in India by U.S. financial-services firms could shrink 15% to 20% over the next year
by Mehul Srivastava and Nandini Lakshman
DELHI As the credit crunch on Wall Street sent dominoes toppling around the globe, Tata Consultancy Services, India's largest software-services company, started tightening its belt.
Travel was restricted, electricity consumption was to be reduced, and the company considered removing Microsoft (MSFT) Office from its PCs and replacing it with free open-source alternatives, employees say.
India's seemingly unstoppable outsourcing industry is grappling with the woes of the financial firms that make up as much as half of revenues for some players. "How this plays out, who knows?" says Pramod Bhasin, CEO of Genpact, the world's largest business process outsourcing company. Although he's optimistic, he says: "The ability to predict has gone away."
HOW TEMPORARY?
Outsourcing companies have already pulled back on new office space and leases, according to Knight Frank India, a property consultant. "Their level of concern has gone up dramatically in the past few weeks with their top-tier customers vanishing right before their eyes," says John McCarthy, a Forrester Research (FORR) analyst who traveled to India twice in September to meet with jittery Indian players. "Anyone who says they aren't worried is probably lying."
In the past two months some of the biggest names in U.S. finance have gone under. Vanishing with them is the kind of work Indian software professionals have long excelled at—projects requiring mountains of coding and individual attention. In the first half of 2007, financial companies around the world handed out at least 48 major outsourcing contracts with a total value well in excess of $5.5 billion, reports researcher ValueNotes. The first half of this year saw just eight such contracts with a total reported value of $767 million. "A lot of companies are putting on a brave face and saying this is just a temporary phase," says ValueNotes CEO Arun Jethmalani. "But how temporary is temporary?"
The estimated hit to India's outsourcers? As much as 8% of total revenue could vanish, Forrester predicts, as information technology spending in financial services shrinks by 15% to 20% over the next year. India's top five info tech and outsourcing companies saw slower growth in the first quarter, and their stocks have taken a beating. TCS's annual profit growth slowed to 7%, down from 36% in 2007. The company declined to comment for this story. Infosys Technologies has warned that it probably won't see a rise in profit this year but had no further comment. Satyam Computer (SAY), the No. 4 software service provider, says it has contracts with Lehman Brothers, AIG (AIG), and Merrill Lynch (MER). Those are "minuscule parts" of Satyam's $2.7 billion in annual revenues, says Chief Financial Officer V. Srinivas. "But that doesn't mean there won't be an impact in the future," Srinivas says. "We would be kidding ourselves if we thought that."
Optimists predict the downturn will be short. They say revenues will bounce back when American business decides to be more efficient, resulting in more outsourced work. One rosy estimate, by consultancy Everest Group, projects that cost-cutting spurred by the crisis will result in a 40% to 50% increase in financial-service outsourcing over the next five years.
The Indians, though, will continue to face increased competition for those jobs. Global players such as IBM (IBM), Accenture (ACN), and Hewlett-Packard (HPQ) have grown deep roots on the subcontinent. "The crisis will make [the Indians] face the reality of doing global business," says Siddharth A. Pai, managing director of TPI, a consultant that helps companies manage outsourcing contracts. "They haven't seen the trough yet."
Outsourcing Shops Feel the Street's Pain
Info tech spending in India by U.S. financial-services firms could shrink 15% to 20% over the next year
by Mehul Srivastava and Nandini Lakshman
DELHI As the credit crunch on Wall Street sent dominoes toppling around the globe, Tata Consultancy Services, India's largest software-services company, started tightening its belt.
Travel was restricted, electricity consumption was to be reduced, and the company considered removing Microsoft (MSFT) Office from its PCs and replacing it with free open-source alternatives, employees say.
India's seemingly unstoppable outsourcing industry is grappling with the woes of the financial firms that make up as much as half of revenues for some players. "How this plays out, who knows?" says Pramod Bhasin, CEO of Genpact, the world's largest business process outsourcing company. Although he's optimistic, he says: "The ability to predict has gone away."
HOW TEMPORARY?
Outsourcing companies have already pulled back on new office space and leases, according to Knight Frank India, a property consultant. "Their level of concern has gone up dramatically in the past few weeks with their top-tier customers vanishing right before their eyes," says John McCarthy, a Forrester Research (FORR) analyst who traveled to India twice in September to meet with jittery Indian players. "Anyone who says they aren't worried is probably lying."
In the past two months some of the biggest names in U.S. finance have gone under. Vanishing with them is the kind of work Indian software professionals have long excelled at—projects requiring mountains of coding and individual attention. In the first half of 2007, financial companies around the world handed out at least 48 major outsourcing contracts with a total value well in excess of $5.5 billion, reports researcher ValueNotes. The first half of this year saw just eight such contracts with a total reported value of $767 million. "A lot of companies are putting on a brave face and saying this is just a temporary phase," says ValueNotes CEO Arun Jethmalani. "But how temporary is temporary?"
The estimated hit to India's outsourcers? As much as 8% of total revenue could vanish, Forrester predicts, as information technology spending in financial services shrinks by 15% to 20% over the next year. India's top five info tech and outsourcing companies saw slower growth in the first quarter, and their stocks have taken a beating. TCS's annual profit growth slowed to 7%, down from 36% in 2007. The company declined to comment for this story. Infosys Technologies has warned that it probably won't see a rise in profit this year but had no further comment. Satyam Computer (SAY), the No. 4 software service provider, says it has contracts with Lehman Brothers, AIG (AIG), and Merrill Lynch (MER). Those are "minuscule parts" of Satyam's $2.7 billion in annual revenues, says Chief Financial Officer V. Srinivas. "But that doesn't mean there won't be an impact in the future," Srinivas says. "We would be kidding ourselves if we thought that."
Optimists predict the downturn will be short. They say revenues will bounce back when American business decides to be more efficient, resulting in more outsourced work. One rosy estimate, by consultancy Everest Group, projects that cost-cutting spurred by the crisis will result in a 40% to 50% increase in financial-service outsourcing over the next five years.
The Indians, though, will continue to face increased competition for those jobs. Global players such as IBM (IBM), Accenture (ACN), and Hewlett-Packard (HPQ) have grown deep roots on the subcontinent. "The crisis will make [the Indians] face the reality of doing global business," says Siddharth A. Pai, managing director of TPI, a consultant that helps companies manage outsourcing contracts. "They haven't seen the trough yet."
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