Revisiting the 2011 IT outsourcing forecasts

Predictions that came true during 2011
December 16, 2011

One of the significant trends that were predicted was that the IT players will renew the existing contracts for cost savings. This was a reality as the CEO’s and CFO’s were mounted with huge budget pressures. Most of the IT players were engaged in renegotiations to generate savings. As outsourcing generated huge savings, managers started to outsource more work to service providers.

Legacy outsourcing provider had a difficult time with cloud services. Cloud services had issues with security and customer data was exposed. As a result, the service providers offered the same service they always had and called it as cloud. The legacy service providers have realized the risk associated with cloud computing.

Outsourcing service providers were particular with the price for their offerings. In the cases where customers demanded price concessions, the service providers requested for longer terms for the contracts. The service providers cannot sacrifice in their profit.

With the unemployment in the US, the American politicians have announced that they will come up with protection programs and will reduce off shoring. But little has been done in this respect. A bill that penalizes companies for outsourcing call center function was placed in the house. But the success of this bill is to be found out in the coming days.

The leading US service providers continued to increase their offshore operations across the world, which was followed by layoffs in the domestic market.

Predications that went wrong in 2011

It was predicted that a significant merger will happen between a US outsourcer major and a leading Indian service provider. But this merger has not occurred till date. The service providers see no logic in investing huge amounts to acquire large corporations.

China, Brazil and Egypt were predicted to become the favorite destinations for outsourcers. But service providers from these countries mainly concentrated on serving internal markets and regional markets.

The following are the predictions that were close,

  1. It was predicted that smaller IT services will rule the market, with activity gaining momentum during the end of the year. The market experienced a decline in the third quarter of the year, but it is still unclear whether the market has picked up during the last months.
  2. Another prediction that was close was that the service providers will adopt automation to protect margins. This is happening, but at a low pace. 

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