Outsourcing Trends 2007: What's New and What's Not?

The slight decrease in the IT dynamics at the beginning of 2000s being over, the new drivers has fueled further development of the IT branch throughout 2006 – 2007.

One of the tendencies of the global impact has to deal with growing business value of the Internet as well as associated boom in e-commerce. The IT-rich enterprises have won substantial market advantage over the competitors that have not placed IT as the key element of their business strategy. According to Gartner, the investments in the new information technologies would double within 2006 – 2010 period.

The burning IT issues of the two previous years have included digital convergence, mobility and Service-oriented architecture. Other point of focal interest turns out to be the alignment of IT and business processes within the enterprise in general and in sourcing models in particular.

The analysts from Experton Group have come up with the statement that in the next few years outsourcing "would be the driving force behind IT market dynamics". Despite the global slow down in outsourcing dynamics – for the most part in America, the number and quality of outsourcing contracts concluded in Europe has risen during the first quarter of 2007 (Morrison & Foerster's Global Sourcing Group). The year 2007, alike the previous one, has demonstrated the increase in the IT staff, despite the forecasts for decrease due to the outsourcing of IT activities. Hence, it proves out that outsourcing strengthens the market position of outsourcing buyers, expanding their technological scope and consequently creates new workplaces.

During the past few years we have seen the shift occurring in decisive factors for outsourcing: in addition to traditional reduction of development costs, outsourcing buyers become more and more interested in access to the pool of talents (due to the internal shortages of highly-qualified IT graduates) and industry-specific know-how. Another visible trend of 2007 is multisourcing, accompanied by growing process-orientation. The time of "mega-deals" is left behind, while overwhelming reduction of the contract’s scope becoming a nowadays reality. "Gartner’s Key Predictions for 2007" include the forecast that through 2009, market share for the top 10 IT outsourcers will decline to 40.0 percent (from 43.5 percent now), equalling a revenue shift of $5.4 billion. The above mentioned trend consequently leads to the growing number of SMEs on the IT arena and therefore the increase of the impact on the outsourcing landscape.

Precise attention should also be devoted to the Top Trends 2007, outlined by CIO Insight: particularly, Management section of the forecast features predictions that outsourcing will change IT management and that offshoring will shift from India. Concerning the later tendency, notwithstanding pure neashoring, it is worth to note that Indian outsourcing providers are increasingly seeking possibilities for mergers with Eastern European software developers. Inevitably, outsourcing "moves closer to home", with Indian and Chinese outsourcing proposals becoming less appealing to European vendors.

Over the years, data privacy as well as data security has become fundamental prerequisites for successful outsourcing cooperation. Therefore, intellectual property issues together with effective practices on risk mitigation will stay top of the agenda for the years to come. Also, outsourcing service providers are expected to be capable of driving innovation and delivering industry specific know how. Another trend of interest, highlighted by Morrison & Foerster’s Global Sourcing Group, introduces transformational application outsourcing, which foresees restructuring of the code in a more modern architecture, therefore making it deployable in SOA.

To sum up with, the coming years will see tighter alignment between outsourcing providers and software development vendors, resulting in more effective business cooperation models. Also, increasing competition will fuel more innovative approach to outsourcing, with process orientation becoming the core of it.