Forrester have released a report with their take on the Vendor comparison in the NorthAmerica, Application Outsourcing Market, IBM and Accenture still lead the market, of course closely followed by a bunch of both Global and offshore players.

Our Forrester Wave services analysis of 13 leading applications outsourcing (AO) providers across 50 criteria has determined that these companies offer adequate service offerings but that they must do more to meet customer demand for value and innovation. The analysis found many Leaders, including Accenture, Capgemini, Cognizant, CSC, IBM, Infosys, Keane, Perot Systems, Satyam, TCS, and Wipro; CGI and EDS were Strong Performers. With once-distinct value propositions between global players and offshore players converging, AO providers now exhibit contrasting - and in many ways complementary - strengths. Capabilities are strong, but customers will need to weigh their particular preferences and requirements to achieve an optimal fit. Offshore players still hold the lead in price competitiveness, while multinational corporations (MNCs) still have the edge in global reach. While the multinationals possess more vertical industry and business domain competencies, most providers across categories struggle with applying them in the context of AO engagements, according to client references. Customers of AO providers are a generally satisfied bunch, although they share the view that applications outsourcers across the board must be more proactive in demonstrating both business and technical value in AO engagements.

Two interesting passages from the report are:

MNCs hold the high ground for domain capability - but do not always show it. Despite efforts to boost their vertical industry and business domain competencies, customers still perceive that MNCs have more capability there. However, many of them struggle to demonstrate these competencies in the context of AO engagements. As one customer reference told us: "If you asked me about the offshore players in general, their strength is technical,not domain (at least for us). We know that they have scalability and technology. We are disappointed that they don't have as much domain capability - but not enough to stop using them. We use them for what they are good at."

This point goes to the very core of the value prop offered / focused on by the global players, how useful would all the domain knowledge be if it cant be translated results for customer in the engagements.

Limits on scalability of Indian providers are becoming apparent to some customers. Some large customers of offshore providers have begun to notice that the ability to scale rapidly - a key element of the offshore value proposition - is beginning to erode. As one customer with extensive experience with offshore providers said: "They have historically met our expectations very well, but I've seen a trend during the past six months that suggests that they are having greater difficulty supplying people with the right skills. The actual supply is adequate, but the supply of the right skills is inadequate. They can give us bodies - but not necessarily the right ones."

Its a serious problem for the offshore vendors, at the same time I don't think the doomsday scenarios are right but I do believe companies and clients are going through a rough patch getting the right people, and given the economics of the industry companies are first keen on getting a body there and not really focusing on how suitable he/she is.

Source: 1, 2

Prashanth Rai