Predictions for IT Outsourcing in Second Part of 2010

Posted: July 21, 2010 in Market Research

Recent LinkedIn discussion What is your forecast for IT outsourcing industry in second part of 2010?” was focused on updating the IT Outsourcing industry perspective for provision of professional consulting and development services worldwide as well as discussing the main trends and issues surrounding the industry in relation to the struggling economy.

The group of highly-experienced and acknowledged professionals from various business sectors kindly contributed their professional opinions and forecasts on this matter. To facilitate the discussion and provide possible directions to choose from, the following variants have been included:

1. Demand for IT outsourcing services will grow at a fast rate and will reach pre-recession levels in last quarter of 2010.
2. The industry will see a steady recovery, however it won’t reach pre-recession levels
3. The recession effects will continue to affect the industry
4. The Industry will transform – new business models and approaches come to the scene i.e Cloud Computing
5. The industry will transform – change in delivery preferences – sameshoring, nearshoring

Although many participants agree that the industry is being gradually recovered, they don’t see anything close to pre-recession levels till 2011-2012. The second half of 2010 would remain to be for critical operations only, as companies are still running on the cut budgets allocated during the crisis period. Moreover, the stimulus funding in US, which has helped jumpstart and restart a lot of IT projects, is expected to be ended soon. And in this political climate more stimulus seems unlikely, as there’s a growing outcry to close the deficit.

However, cost saving and long-term growth sustainability would drive the industry and it will be more a strategic spending in 2011. Also, respondents agreed that the industry is most likely to reach the pre-recession levels by 2012.

As for new models and delivery changes aspects – participants see a growing popularity of the Cloud Computing in next years, as businesses will be looking for global sourcing strategies and payperuse models. Some professionals, however, argued that there is nothing so much new about it and doubt if it will be of great demand as predicted.

Most participants agreed on the shift in delivery preferences from offshore to nearshore. Geographical and cultural proximity, combined with increased focus on security and vulnerability, will allow nearshoring destinations to eclipse traditional offshoring leaders in their specific geographical clusters such as North America and Western Europe.

Canada, Central and Eastern Europe and Latin America, for example, are seen as significant nearshoring destinations for US and Western European customers respectively, and US and Western European clients can have lower total costs with nearshoring to Canada and Central and Eastern Europe respectively than with offshoring to India.

(Reprint from Levi9)

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