Outsourcing predictions for 2008
From India to Eastern Europe what are the key outsourcing factors to consider
By Stephanie Overby CIO.com | Published 08:15, 19 December 07
8. Call centre call to arms?
Call centres are the most mature segment of the offshore outsourcing industry. And yet... they're not. Clients have become dissatisfied with the sweatshop mentality that leads to turnover levels from 60 to 150% a year, says neoIT.
Part of the problem is, of course, the nature of call centre work. One industry provider reports that it loses half its staff during the first 100 days of work, says neoIT, but turnover levels out after that.
Nonetheless, clients are demanding improvement. And providers are beginning to respond, says neoIT, by creating more "client-centric" solutions, such as unique scripts and efforts to connect employees to the client's corporate culture. NeoIT predicts that call centre operators will up the ante in 2008, assessing new locations and allocating personnel to customer-specific solutions centres instead of having massive pools of personnel taking calls for multiple clients.
9. The death of the megadeal (really)
The end of the outsourcing megadeal-those $1 billion-plus contracts that get the most attention from the media-has been portended for three years now, but this year may be the year those predictions finally come true. Why?
It's simple. "Few Fortune 100 companies remain that could sign new megacontracts," says Ross Tisnovsky, vice president of IT outsourcing Research at Everest Research Institute.
Of course, big outsourcing deals won't disappear. The focus will be on their renewals and renegotiations, and outsourcers will take the pricing gloves off to woo clients away from their incumbent providers.
"We expect buyers will gain pricing benefits due to the pressure suppliers will have to grow signings and contend with increased competition for contract renewals," says Tisnovsky. "We also foresee long-term price decline in the (large enterprise) infrastructure outsourcing market due to an influx of new suppliers and increased competition."
10. Green clauses hit contracts
Although "green" IT service is little more than marketing hype to date, the trend will take root and become measurable and attainable, says neoIT. While that's debatable, one thing is certain-interest is going to increase among outsourcing customers this year. More than 21% of publicly traded companies that outsource have added "green policies and performance" demands to their vendor contracts in 2007, and 94% plan on adding such clauses during renegotiations, according to the Brown Wilson Group.
That may light a fire under outsourcing providers to decrease their carbon footprints by creating greener datacentres, investing in environmentally friendlier buildings and campuses, and developing eco-friendly processes and policies.
This is an area where smart small to midsize IT service firms will put a stake in the ground. "A smaller player can be audited more easily, can take carbon reduction measures more easily and can be more flexible about changing traditional practices," says UK-based outsourcing researcher Mark Kobayashi-Hillary. "It could be a great source of market differentiation."
11. Outsourcing buyers get smart(er)
In 2008, many outsourcing customers will be entering third and fourth generation outsourcing contracts-either renewing, rebidding or restructuring their deals. And according to PA Consulting, many of those IT organisations have honed their internal capabilities for vendor management and governance over the years. That maturity means they're making smarter decisions, negotiating better terms, demanding better business-driven metrics and getting better at outsourcing lifecycle management. They may also start to create contract terms that shift more of the risk to their IT service vendors, says neoIT.
Of course, there will be plenty of new entrants to the outsourcing market in 2008 who may choose to learn their own outsourcing lessons the hard way... and plenty of challenges in this dynamic market to test the veterans' hard-won skills as well.
