Is 2011 the Year of “Next Gen” Global Services? | Sherpas in Blue Shirts

Posted On January 31, 2011

During our annual Predictions webinar on January 27, during which we outlined many of the key themes shaping the global services market going into 2011, we were pinged with throngs of questions from the audience. As the questions continued to pour in, it became abundantly clear that savvy buyers are thinking beyond price points, SLAs, and contracts, and are now keenly focused on how to drive better global services outcomes for their companies. Let’s take a look at our predictions and buyers’ top-of-mind issues and concerns.

A Sampling of Everest Group’s “Next Gen” Themes for 2011

It’s not all about new deals in traditional markets. Growth in the global services market is increasingly about organizations shifting more operational spend into outsourcing, shared services, and captive operations. These models for managing corporate operations have taken hold, and leaders around the globe are now exploring how to grow existing delivery models and expanding how they use them. For example, in the finance and accounting outsourcing (FAO) market, we predict that organic growth will match growth coming from new engagements in 2011, dollar for dollar.

It’s about expanding value. Global services operations focused on achieving the most competitive pricing at the sake of all other considerations are in a self-defeating cycle. Next-gen services are about balancing cost gains against gains in operational efficiency, process effectiveness, and intelligent process management. For example, we expect more organizations in 2011 to manage their global sourcing and delivery portfolio with an eye toward rationalizing service provider relationships, driving broader adoption across the organization, and better aligning delivery incentives.

Taking cloud services out of the fog. While cloud services continue to be shrouded in a fog of diverse approaches and service provider strategies, it’s clear that a future based on more leveraged and standardized access to technology and processes is imminent. We expect 2011 to move the market forward in clearing some of this fog as more compelling cloud offerings take shape through continued partnering among service providers, CIOs and the intermediaries supporting both.

Service providers continue to feel the heat. Being a service provider these days continues to be a tough job. They’re under increasing pressure to drive more value (as well as better prices) against client spend, they’re facing increasing competition in consolidating markets, and their clients are rationalizing and optimizing their service provider portfolios. In 2011, we expect to see offshore legacy Tier-1 service providers, especially in IT, make selective acquisitions to grow scale against shrinking margins, build onshore capacity, and expand capabilities in order to gain more share of individual client spend.

Now, onto some of the buyer questions we received during our Predictions webinar:

  • Given changing margin profiles, should I consider repatriating my IT services work, and using offshore only for my BPO work?
  • What type of outcome-oriented metrics do you find are gaining market acceptance?
  • What are the upcoming technology plays in FAO?

These clearly indicate service buyers are thinking deeply about how to evolve their current investments in global services, and how to position their organizations to optimize their services sourcing opportunities in the future.

There’s little question that “next gen” service recipients are here — is the market ready to move forward with them?

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Access the recording of the Everest Group 2011 Market Predictions webinar.

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