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Dec 05, 2009

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Vinay:

see this -

http://fersht.typepad.com/the_outsourcing_bloghorse/2010/02/newnormalsurvey6html.html

PF

Phil,
Great summary. However, interestingly, there's no mention of outsourcing of industry-specific processes. Don't you think that'll be a large part of BPO deals?

Your predictions is according to Brazil expectation.

p.s. Including Brazil as the winner of the 2010 World Cup..

Cheers

Phil, great post!

I am a newcomer to your blog, but have been in and around IT or 40+ years and infrastructure outsourcing for 16 years. I am currently with a small consulting firm focusing on Selective (customized) outsourcing arrangements for medium to large enterprises. Interestingly, most of your points are very pertinent to how we see our business in 2010, namely:

i. CIO/CFO,
ii. Labor arbitrage,
iii. Advisors,
vii. Cloud,
viii. Flexibility and Agility
- and possibly -
iv. Vendor Shuffle.

We have formed partnerships with a broad array of firms (on and off-shore), to put together custom, targeted solutions to a client’s requirements. We rarely get involved in "all or nothing" deals. We generally perform a high-level assessment at a small or even no charge, resulting in a set of recommendations that may or may not result in a longer term relationship. In other words, we come in as the Advisor (iii.). We customize a solution (or solutions) that focuses on Flexibility and Agility (viii.) usually involving a combination of appropriate partners with a combination of resources (ii.). Our goal is to assist the CIO (and CFO?) avoid the issues you mentioned above (i.)

We are keeping our eye on the Cloud marketplace with the understanding that it will play a major role in enterprises and, therefore, we want to ensure the Flexibility/Agility is built in to take advantage of the benefits of Cloud Computing as they become more appropriate in an enterprise environment.

Some specific comments about your bullets:

i. CIO/CFO – the combination of the economy, the pending recovery, compliance issues, and an acceleration of both technology and technology packaging, is making life both fascinating AND challenging for IT management (especially as they have reduced resources). A CIO has to cut costs, but be ready for the recovery, keep focused on all of the compliance issues (SOX, HIPAA, PCI, Privacy, etc.), and fend off a constant stream of questions about why or why not SOA, Cloud Computing, Social Networking, Business Intelligence, and many other fast moving concepts. All of this increases the need for the Advisors you suggest in bullet iii. One of the major areas where these Advisors can help is a combination of ii/vii/viii which I classify as service provision.
ii. Labor – we have seen somewhat of a backlash against off-shoring, but it definitely has not stopped it. As you point out, the FACT is that not all that much has been off-shored - yet. Most of it has been done in Applications. I believe we will see more of a hybrid approach for infrastructure, where there is a cadre of on-shore (possibly even on-site) expertise, with a backdrop of off-shore resources to fill out the requirements. A better job needs to be done by vendors (or partnerships of vendors) of integrating the on and off shore teams. We see this as a longer term role for those “Advisors”.

iv. Vendor shuffle – as I mentioned above, I am working on “customized” scenarios involving multiple partners that might otherwise be considered “strange bedfellows”. Isn’t it interesting that Xerox buys ACS (a combo BPO and ITO player), and yet, also announces that they have outsourced the Xerox internal IT infrastructure to HCL? Hmmm. For that matter, you have an interesting set of dimensions within IBM: they sell computers and software to enterprises, do outsourcing for enterprises, have an extensive off-shore operation, and, is setting up for a huge play in Cloud Computing. I can’t wait to see how that plays out. (See my comments below about mainframe.)

vi. Cloud – a very interesting topic in respect to enterprises and outsourcing. IMHO, the market for clouds falls into three "user" categories (sub-markets), 1) consumers, 2) SMBs, and 3) enterprises. Consumers and SMBs will tend more towards external public clouds, while enterprises will be more focused on internal private clouds with some external private clouds (is an external private cloud the same as outsourcing?). I also see what you mentioned above, namely, that some of the traditional outsourcers are making cloud noises. This will be a philosophical challenge for the “pure” outsourcers. Their business model is based on long term, typically inflexible contracts. Clouds are flexible, pay as you use models. How will the pure outsourcers transform from the historical model to the future? I expect we will see traditional outsourcers develop a RIM/managed services offering that runs private clouds – internal, hybrid, and external.

vii. Flexibility and Agility – when you tie all of the above topics together, I believe this prediction becomes fairly obvious. But that is why I think this bullet, combined with i. CIO/CFO, should almost be treated as an overall summary bullet that really encompasses all of the others.

Just for fun, I think there is another prediction for 2010 that you missed, specifically, Mainframes. I have been in IT for over 40 years, starting my career working on mainframes. Ironically, I spent quite a bit of time on the mainframe versions of VM. In the 70’s and 80’s, IBM downplayed VM as “non-strategic”. It appears that IBM has “seen the light”. They recently announced a z/VM-z/Linux ONLY version of the z/10 mainframe. We are hearing about both z-OpenSolaris and z-Windows. They have been aggressively lowering the total cost of ownership in this arena. In 2010, predictions are that IBM will announce the new generation z/11 and there are rumors of an x86-related component. Could this be part of IBM’s Cloud Strategy?

This comment is WAY too long, but that is your fault for packing so much meat into your post.

Ken Cameron, Windsor Group

Phil:
Great read as normal - Thx. Interested in your further comments re: point vi; I thought Cloud had already 'emerged'! It is a game changer so what will happen next and who will go first?
Chris

Special thanks for valuable information about outsourcing industry.

Phil,

Great to see you have not only maintained your critical edge on the dark side, but you've added to it :)

This is a superb collection of thoughts for next year - the best anyone has produced in a long, long time. Bravo.

David

Phil,

Very, very informative. Thanks for sharing,

Gaurav

@Everyone: I also predict that (viii) could be a little wide-of-the-mark, but naively take the view that it may add some karma that it could actually happen if I predict it -:)

PF

@Stephen: Without revealing actual names, I would predict one, or both, of the two leading BPO pure-plays will get acquired. Also predict at least one of the second tier Indian providers will get acquired by one of the leading incumbents to add major offshore scale to its business,

PF

Phil,

I predict that you are indeed a smarty-pants -:)

Suzanne

Phil,

I share your positive outlook for BPO rebounding next year. Definitely been a lot of companies putting plans on hold - especially in F&A and KPO/analytics. Look forward to seeing what the data from your survey reveals,

Matt

Phil,

Like Sandeep, I was right with you for the first seven! Love to know which of the providers you believe could merge,

Stephen

Phil - very good insights on BPO. I agree that many companies will increasingly turn to areas such as HR and accounts once they have squeezed IT as hard as they can for every last drop of savings. You do have to wonder about the added complexity and disruption businesses have to go through by moving out people, as opposed to technical functions... I know many companies have found BPO much more challenging, and the cost savings not as attractive once they get the wheels in motion.

p.s. I love the world cup prediction -:)

Amanda

The "Cartoons of the Recession" prediction is right on the money, Phil. Several CIOs I have spoken to are increasingly concerned with positioning their departments as value-add contributors to the business, as opposed to cost centers. The IT industry in general, is going to have a tough time proving its value to the cynics in this post-recession era.

Excellent predictions. Not too convinced about the World Cup one,

Neal

Damn. I was with you until point viii. Sorry, Phil, but the US is ready to party like it's 1776.

Otherwise, your predictions are on point!

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