IT outsourcing year in review: Grading our predictions

By Stephanie Overby, CIO |  IT Management, outsourcing

Some Indian IT service providers, like HCL and Wipro, are making great strides in the IT infrastructure space. "But it would be wrong to conclude that there has been a meaningful shift from U.S.-based infrastructure providers to offshore companies," says Pillsbury's Zahler.

IT Service Providers Account Managers Get the Boot

If only. "The annoyance is there but so, too, are the sales people," says KPMG's Lepeak. "Slow progress is being made with putting in better, more industry- and function-literate account management, but it is a slow process and one which still seems counter-intuitive so some providers and their leadership."

"The talent gap among the service provider community's account management teams has been a real sore point," says Filippone of HfS Research. "Our 2012 research shows that buyers have a desperate need for analytical thinking, better business-based solutions, and innovative thinking. This has taken the schmoozing order takers and tactically minded operations-based account managers by surprise. Service providers have just begun to learn that the size of a Rolodex is a poor metric of potential sales success."

Application Development Migrates Stateside

Any increase in domestic application development activity has been minimal, says KPMG's Lepeak. Outsourcing customers still sought cost savings first and foremost from their programming partners. "For many types of application development and maintenance work, it still is less expensive to do that work offshore than in secondary U.S. cities," says Zahler of Pillsbury. "Efforts are underway to develop truly cost-competitive development sites in the U.S., but such sites are not of sufficient scale to make a noticeable impact in the market."

Wait and See

Outsourcing Buyers Take it Slowly

That was true for big bang outsourcing deasl. "We continue to see a lot of 'wait and see' among buyers," says Stan Lepeak, KPMG's global research director. "A combination of weak economies, political uncertainty, fiscal cliff fear, and several years of living with incremental change as the norm has instilled a hesitancy among many buyers to pull the trigger on big change efforts, especially those with long term implications and big change management elements."

However, renegotiation of existing contracts-including selective addition of new services-was relatively strong, notes Zahler

IT Outsourcing Deals Gets Small

"Smaller deals ruled the roost in 2012, but look to the scheduled big deal renegotiations in 2013 and 2014 to demonstrate whether buyers want to break apart larger deals in favor of smaller once," says Filippone of HfS Research.


Originally published on CIO |  Click here to read the original story.
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