Outsourcing, Industry, Predictions, 2007, Luxoft

Russian outsourcing leader Luxoft issues industry predictions for 2007

18 Jan 2007 | (News)

Luxoft, one of Russia’s leading providers of IT outsourcing development and services to companies like IBM, Dell, Deutsche Bank, T-Mobile and others, issued its predictions for the IT outsourcing industry in 2007.

These trends and predictions cover a range of technical, business and relationship pulse points and show the increasing maturity of the global IT outsourcing market. Top areas to watch include:

Hybrid Models Become the Norm
No one approach – in-house, on-site, ODCs or captive models – will rule the day in 2007. Each company will access its available global resource and skill pool and choose a variety of outsourcing and in-house combinations to reach its desired business and technical goals. Outsourcing … whatever model or mix is ultimately chosen … will become as commonplace as Six Sigma.

Retention Eases Tensions
Clients want well trained, stable and vested vendor teams working on their engagements. In 2007 they will increasingly demand that vendors meet – or preferably exceed – the average industry retention rates of 85 – 88% as a requirement of winning and doing business.

The Security Bar Is Raised
In 2007, all forms of security will make it on to the shortlist for any successful outsourcing engagement – system, physical, staff and disaster recovery. These elements must be locked down and fully integrated before true security can be achieved and clients will increasingly demand excellence on this front.

Near Shoring Comes Closer
No matter where a company is headquartered or has operations, it will increasingly look to near shore development solutions to round out its outsourcing portfolio. In 2007 there will be increasing demand for outsourcing resources in Europe, Eastern Europe and Canada but this phenomenon will be seen with resources around the globe.

Value Becomes King Over Pure Cost
With the outsourcing market continuing to mature, tunnel vision around pure cost savings will continue to widen to other success factors such as the ability to deliver complex outsourcing engagements, high relationship quality and tangible ROI. In 2007 Companies will increasingly look for outsourcing partners who can provide higher value services; who have mature and proven – yet flexible – engineering, quality, security and business processes; who can forge quick and strong working relationships; who are well trained and bring specific technical and vertical expertise; and who will become vested in their success.

Fluency of Many Forms Is a Must
It’s no longer enough to be fluent in English – and other key business languages – to do outsourcing business with U.S. and global companies. In 2007 fluency in specific technologies, industries, and methodologies will continue to grow in importance as "must haves" for any serious outsourcing vendor.

Player Consolidation Continues
With the need for outsourcing providers to ensure scalability of services and support for clients, consolidation among smaller service providers with similar strengths and expertise will continue in 2007. Forrester Research, in its latest report has said that global outsourcing industry could face sweeping consolidation in the next two years, mainly driven by low-cost global competition and broken business models.

Outsourcing companies will make expansion plans to compete with global leaders, to acquire vertical domain expertise as well as the access to the global resource pool. Consolidation growth will be most visible in the upcoming outsourcing markets like China and Russia with possible buyouts across the regions.

Financial Industry Increasingly Banks on Outsourcing
In 2006 financial and banking companies came on more strongly as a consumer of IT outsourcing. In 2007, this trend will continue with areas like CRM in demand. Top of mind success factors for the vertical will increasingly be security, risk and financial market diversification, disaster recovery planning and engagement staffing standards. We’ll also see more real time areas like on-floor trading technology get in the outsourcing mix.

Outsourcing Gets More Agile
In 2006 there was increasing interest in employing the Agile development methodology in outsourced environments. This will continue to grow and expand in popularity in 2007. With the right people, project management and metrics in place this highly collaborative approach – traditionally thought to be only for in-house teams – will continue to speed client solutions to market.

Russian IT Outsourcing Sees More Record Growth
Over the past few years Russia has seen explosive growth in its outsourcing business – now over the $1B market mark. With its strong technical performance and heritage, well-educated developer and business workforce and increasing Eastern European connection, Russia is poised for another year of stellar growth and value add to clients.

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