Computerworld has a Q&A, Below are excerpts:

What are the major trends you are seeing in the large global outsourcing deals you are advising on? Contract duration is coming down. The first- and second-generation deals were seven to 10 years. They are now closer to five to seven years. This results in smaller total contract value.

Another trend is the proliferation of offshoring in outsourcing contracts. Up to 50% of the transactions TPI is involved in have an offshore component. Clients are more predisposed to look at and engage with service providers who have an offshore service delivery capability. This, in turn, is also reducing total contract value.

We are also advising on more multivendor deals, as well as selective sourcing deals, rather than single-vendor deals. Clients are seeing value in best-of-breed solutions. As a consequence, it is putting more pressure on vendor management and governance.

The final area we are seeing a trend is the continued lack of appetite for BPO [business process outsourcing] generally in the outsourcing market and large deals in particular. Yes, it is happening, but not to the extent that the so-called market research firms have been predicting for some time. TPI sees a disconnect between service provider capability, which seems to be focused mainly on a "lift and shift" approach, compared to clients' needs, which go beyond that paradigm.

The U.S. has been the primary source of offshore outsourced work to this point. Who else is sending work abroad? It is predominantly the U.S. and Europe. These are still by far the markets that dominate in the amount of work that is being exported offshore.

Would you say India is still the premier destination for companies sending work offshore? India's leading the pack, but the landscape is changing quickly. Every month, there are new countries coming into play with new offerings. The landscape is getting wider, deeper and more competitive. This is certainly a good environment for the large global organization my firm works with.

Some people say India is becoming too expensive, especially for new entrants. What do you see? India and a lot of countries are facing escalation in costs. I don't think India is particularly unique in that. If you look at China, inflation in some areas is pretty substantial as well.

Although the cost benefit is still important, it is not just about cost anymore. Today, it has to have the benefit of scale attached to it as well. It is very difficult to take a piece of work which has five FTEs [full-time equivalents] and say we want to do it for 20% less. If it's got 500 FTEs, then you have potential, because you have economies of scale to re-engineer the way you do things. India has developed the know-how to re-engineer processes so savings can still come out. Countries that are newer to the outsourcing business are not yet at that stage.

Source:1

Tags: offshoring - outsourcing - gerry+clark - TPI

Prashanth Rai