Top ITO and BPO predictions 2008-2012

Predictions for ITO/BPO for the period 2008-2012, from LogicaCMG.

Global scene  

1. Spending will continue to rise in all global sourcing markets. But BPO will soon overtake ITO. The ITO and BPO outsourcing markets will continue to grow through what has always been the dominant trend: multiple supplier sourcing.

2. From viewing India primarily as a location for low-cost outsourcing, global clients will perceive it as a destination for excellence. China’s investment in ITO/BPO services signals promise, but Western clients will still be wary. Looking beyond India and China, developing countries will become important players in the global business and IT services markets.

3. Near-shoring will become much more prevalent. Within the USA, rural sourcing will become a niche market.

New types of outsourcing

4. Large companies will give application service provision (ASP) a second look. ‘Netsourcing’ will see suppliers differentiating themselves by offering customer-based services while commoditizing their virtual delivery platforms.

5. Knowledge process outsourcing will increase. However, within other outsourcing arrangements knowledge management will still not feature on the radar screen.

6. Freelance outsourcing will increase.

Supplier strategies  

7. Major global and Indian suppliers will increasingly emulate one another. Indian suppliers will mature and diversify, while others will increase their number of low-cost captive centres or offshore alliances to stay price competitive. Large global suppliers will use acquisitions, both large and local, to expand their customer base.

8. Alliance supply networks such as prime contracting and best-of-breed will become the norm in large-scale outsourcing deals.

9. As multi-sourcing dominates, suppliers will have to get used to the probability of more customers in lower value deals.

Client developments

10. Outsourcing will help insourcing. But back sourcing will be minimal. Outsourcing is here to stay.

11. Clients will transcend ‘hype and fear’ and migrate to maturity with ITO, but less so with BPO and newer outsourcing forms. Maturity will be signalled by value-addition overtaking technical excellence, and even cost, as a priority. Also, by building beyond contract management to achieve outsourcing leadership and innovation capabilities.

12. Relationships will be increasingly managed and leveraged as strategic assets. The indicators of this will be: more rigorous relationship planning and measurement, more contracting based on values and behavior, and, on client demand, suppliers becoming more entrenched in their client’s business.

13. Outsourcing failures and disappointments will continue to occur. The main causes will be:

* organizations taking on more than they can manage,

* contracts with poor payoffs,

* inflexible contracting in dynamic environments,

* suppliers selling more capability than they can deliver,

* clients failing to learn quickly clients failing to invest in the leadership practices and retained capabilities needed to keep outsourcing aligned with short term back office service requirement and long term business direction.