8 outsourcing trends you need to know about

1. Security problems: The marriage of security and outsourcing is always a problem, especially if the contract involves offshoring work. This year outsourcing giant India took steps to ensure offshored work was secure. The country’s National Association of Software and Services Companies set up a watchdog organization that it says will monitor data security and privacy practices in the country's IT services, call center and business process outsourcing industries. The initiatives were taken in the wake of allegations in the United States and United Kingdom that Indian call center workers have stolen and sold data processed by Indian outsourcing companies. The issue of security isn’t limited to India.
2. China's rise: With everyone from IBM to Unisys directing billions of dollars its way, China certainly got a lion share of investment this year from some of the largest outsourcing players in the world. And even India's outsourcing giants -- Tata, Infosys and WiPro -- have a growing presence in the country. To back that up, a study released by Analysys International earlier this year said China's software outsourcing services market reached $323 million in the first quarter of 2006, up almost 44% compared with the first quarter of 2005. Still security concerns dog the country’s industry fledgling business.

3. India's growth: Can anything slow the offshoring/outsourcing machine that is India? It doesn't seem likely. Despite any inroads China may be making, India’s outsourcing numbers keep getting larger. The country’s software and services voice, National Association of Software and Service Companies says the country’s BPO services will grow 35% to 40% in fiscal year 2007 to achieve between 8 billion and 8.5 billion vs. $6.3 billion in the previous fiscal year. According to Nasscom estimates, the total revenue for the entire IT sector, domestic and exports, by the end of the current fiscal is estimated to be about $36 billion to $38 billion. And this month Infosys will become the first Indian company to be included in Nasdaq’s prestigious list of top-100 companies.

4. India's turmoil: Everything isn’t rosy in the 'Truth Alone Triumphs' country however. India isn’t immune to the violence and turmoil that exists in the rest of the world. Some of its internal strife spilled into the outsourcing arena this year with bombings, a strike and online threats. Not to mention the ongoing staff shortage. When you're No. 1 the target on your back is a lot bigger.

5. Blunders: Whether or not it’s a company’s decision to bring work back in-house or a contractual failure, the dumping of an outsourcing contract is never very pretty. A Deloitte study last year said nearly 75% of the 25 large companies surveyed have had negative experiences with their mega-outsourcing projects. It’s a wonder more don’t flame out.

6. H-1B visa trials: The year began with promises that the H1-B levels would be raised by the year-end. But that push got lost in the politics of Washington, D.C. The Democratic congress will likely take it up again early next year but most experts agree its scale could be significantly reduced.

7. Small business outsourcing: Perhaps it’s a natural outgrowth of the industry’s larger outsourcing trend but this year small and midsize businesses (SMB) seemed to take a harder look at outsourcing as a way to run their companies. Gartner estimates that about 90% of all new businesses created in the United States are in the SMB sector. It's a huge opportunity for outsourcers as these small firms begin to recognize that they can achieve the same benefits that large organizations enjoy when they hand over non-core IT functions to outside service providers.

8. Managed services: Perhaps epitomized by IBM’s Global Services business, managed services have grown by leaps and bounds this year, a market segment that will be worth more than $630 billion by the end of 2006. But experts say as these service grow users need to be ever-more diligent about contracts and what they expect from their vendors.