India, China and multi-sourcing
2006 in the outsourcing world was once again about India but increasingly also China, as the geographical boundaries became ever more blurred. Fewer high-profile outsourcing deals also suggests companies are finally getting the hang of the new 'multi-sourcing' approach of divvying up work between a few key suppliers. Despite this progress, reports Andy McCue, outsourcing remains a contentious and divisive issue.
The globalisation of IT services continued apace in 2006 as the boundaries between offshore and onshore became ever more blurred.
The 'big three' Indian IT giants - Infosys, Tata Consultancy Services (TCS) and Wipro - posted another phenomenal year of bumper double-digit profit growth, bagging more lucrative high-profile contracts along the way.
The difference this year is the Indian companies started to significantly ramp up their overseas operations in places such as China, Europe, the UK and the US. They also built up their consulting capabilities and moved away from their pure offshore outsourcing roots to a more border-less global delivery model.
The flip side is that the big global outsourcers - Accenture, EDS, IBM and the rest - also continued to build up their offshore capability in India and China, meaning there is increasingly less and less to differentiate the traditional IT services players and those who started out as pure offshore outsourcers.
But India still has its share of problems. In November IT trade body Nasscom warned the country faces a major skills crisis by 2010 that will force up offshore wages and threaten India's dominance. Despite that a major study predicted India's cost advantage over other offshore locations will last for at least another 30 years.
India's call centre and BPO industry was the scene of much controversy in 2006 with yet more undercover stings exposing poor security of customer data - most notably the Channel 4 documentary Dispatches which claimed its reporter was able to infiltrate criminal gangs selling thousands of UK credit card and passport details for as little as £5 each from the country's offshore call centres.
In response to the offshoring backlash, this year a couple of companies opted to ditch the use of Indian call centres and bring the work back to the UK. Powergen brought its offshore call centre work back to Blighty in an attempt to improve customer service and reduce the level of complaints, while online insurance company eSure has said it plans to switch work from its Bangalore and Mumbai call centres to Manchester by March 2007.
But for every company making that move, dozens are going the other way - and all the major financial services institutions are continuing to ramp up their Indian presence. HSBC, for example, is opening a new 2,000 seat facility in Kolkata and a software development centre in Hyderabad.
Offshore outsourcing is likely to remain a contentious issue because of the security stings and links with domestic job losses. A recent Deloitte & Touche survey found a third of the British public want companies to be forced to bring offshore work back to the UK.
China was also a big story in 2006. It's the one country with the resources and scale to challenge India and the West not only in outsourcing but across the entire technology spectrum. silicon.com travelled to China earlier in the year on a fact-finding mission and reported on what all the fuss is about in this Inside Chinaspecial report.
Overall outsourcing continues to be a divisive issue. At silicon.com's CIO Forum event in September the best and brightest of the UK's IT chiefs were divided over whether it's a good idea. Some said nobody else would be able to run their business the way they do or they simply don't trust outsourcing suppliers, while others argued outsourcing can liberate them from 'chores' and free them up for more valuable projects.
The much-hyped trend for in-sourcing - whereby a company brings an outsourced IT function back in-house - failed to materialise in 2006. The only high profile example was high-street chemist Boots bringing 100 IT jobs in-house after renegotiating its £710m outsourcing deal with IBM.
Instead the outsourcing industry buzzword in 2006 was 'multi-sourcing', whereby organisations opt to divvy up their IT services among a select group of suppliers rather than put all their eggs in one giant mega-deal basket.
The major example of this was US giant GM, which handed out $15bn of outsourcing contracts to a range of suppliers including Capgemini, Compuware, Covisint, EDS, HP, IBM and Indian company Wipro, as well as reducing the length of deals from 10 years to five. In the UK telco Vodafone also went down the multi-sourcing route by splitting its outsourcing work between EDS and IBM, and this is a trend we can definitely expect to see more of in 2007.
The absence of any major outsourcing project failures or job loss rows with trade unions in 2006 - which dominated the headlines in previous years - also suggests a level of maturity has been reached among both the buyers and suppliers of IT services
The main forecast for 2007 is yet more globalisation of ever higher-value services. The year began with electrical retailer Dixons outsourcing its IT to Indian company HCL in a £150m deal - and it ends much the same way, with Indian companies such as TCS picking up yet more mainstream contracts with the likes of supermarket chain Somerfield and United Biscuits.
没有评论:
发表评论