"The increasing importance of profit margin cannot be overstated," says Rutchik of Pace Harmon. "Chasing topline is a thing of the past&and the deals themselves in many instances are in fact smaller, or at least separated into more individual parts, with customers managing a multi-provider environment with internal tools, process and governance."
More Backsourcing Talk Than Action
GE stole the show with its announcement that it's working to hire 1,300 IT and engineering professionals at its Advanced Manufacturing and Software Technology Center (AMSTC) in Michigan by 2013. But any meaningful domestication of sourcing strategy will have to play out over years. "What we really saw in 2012 was organizations realizing that the onshore-offshore talent gaps were meaningful to some operations, but not everything," says Filippone of HfS Research. "Offshore volumes grew, but onshore capability became a differentiator in the eyes of buyers. Buyers began to tinker with how to successfully integrate offshore talent with onshore talent, which was a positive sign."
"Some work is coming back onshore and some work is not going offshore," adds KPMG's Lepeak. "But overall the relative size and value of this work remains small compared to the totality of what is outsourced."
IT Outsourcers Embrace Riskier Models
KPMG's Lepeak would call it "more a cool and detached hug than an embrace." Some providers, particularly those in Europe, did begin to shake things up. "We've seen providers say yes to deal structure points and people transfers that are atypical," says Krieser of K&L Gates, "likely because increased competition dictates that providers agree to these things in order to win deals." There were also more aggressive pricing tactics and service providers looking to leverage economies of scale," says Filippone.
But a wholesale embrace of new models? Didn't happen. " While there is a fair amount of talk about this, engagement models have not really changed much over the course of the past year," says Rutchik of Pace Harmon. "Providers will allocate 'innovation dollars' in order to win business, but these are effectively just that-business development tools rather than structural, strategic changes."
IT Security Takes Center Stage
Data breaches continued with hacker and state-sponsored threats looming large. But there was little link to outsourcing per se.