Last night at the IDC Tele briefing titled "The Services Marketplace in 2007: Predictions for Business Model Change", the analysts presented their Top 10 Services Predictions for 2007. Here is the Slide with them:

Some initial notes from the briefing:

War for Mid Sized Deals
The year 2006 was a good year for Mega Deals (Above 1 Billion $), it surpassed the 23 Deals in 2003, 2007 is expected to be a weaker Mega deal year hovering around the 15-20 deals mark,

2007 will be see a good war for mid sized deals, deal which are sized in the 50-250 million $ region, Since 2002 the competitors for these sized deals have doubled specifically in the ITO market competition has gone from 25 vendors in 2002 to 56 in 2006

The competition can be divided into two camps the Large global power houses (IBM / Accentures, logica CMG) and the mid sized offshore competition & regional/local firms in the form of Cognizant, HCL, ,Wipro, TCS etc

Large global powers are as expected going to continue their victory run, in the over all services space - Offshore players expected to get 2 or 3% of the business, in the Application Services specific space the offshore players are expected to continue doing well. One of the key factors for the large players is the availability of local assets & local capabilities, offshore players will need to make strategic investments in outsourcing capabilities from direct investments in data center buildouts to strategic acquisitions of infrastructure outsourcing or hosting providers, As most organizations aren't comfortable moving their assets outside the US.Also Large vendors will need to add sales capacity and better account coverage & Mid-sized vendors need to add more talented professionals to pursue such accounts.

The Mid Market Brass Ring
Mid market hasn't been the focus of the service providers, most vendors are geared to handle the mid market, But in 2007 the mid market is expected to be hot, this is being caused be a convergence of many trends, first the focus of large software vendors , SAP, Oracle Microsoft etc, on the mid market, in the blog we have previously covered specifically SAP's mid market plans, an example of which is to grow their customer base from the existing 30000 to 10000 in the future primarily through growth in the Mid market.But the service providers will need to change their approach, the traditional models will not work for the mid sized players.Mid market companies are looking favorable at hosted models which help deliver enterprise class performance, with not the same investments/ costs.SaaS is another options with traction, but the trend which we discussed earlier of bundling SaaS + BPO to deliver Business Service is also getting some traction.

More Later

Prashanth Rai

Special thanks to Michael Shirer of IDC for the Invite to the event.