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Issue Date: October 2007

Global sourcing on a level playing field

31 October 2007
Nick Mayes

The $600bn IT services market has reached a watershed in 2007. The last five years have seen the big western services vendors such as IBM, Accenture, and EDS rapidly ramp up their headcounts of programmers, helpdesk managers, and back-office administration staff in low-cost offshore locations such as India and eastern Europe.
This was largely triggered by a need to stay price competitive against India's fast-growing services suppliers such as Tata Consultancy Services and Infosys Technologies, with which many clients in North America and western Europe first engaged for low-cost Y2K programming support.
But it is no longer enough for vendors to tell clients that they can be competitive because they have access to offshore resources. The new reality is that the vast majority of suppliers have now put a tick in the 'India' box through aggressive recruitment campaigns or acquisitions.
A little over a year ago, French player Capgemini was considered a laggard in terms of global sourcing, but thanks to its acquisition of Kanbay, it has grown the percentage of its workforce based in low-cost locations to 22% from 9,8% in just 12 months. Computer Sciences Corp also made up a lot of ground on its rivals through the purchase of Covansys.
This week, Norwegian IT services vendor EDB Business Partner announced a deal to buy a 50% stake in Indian contractor Span Infotech, while French vendor Steria recently completed its $1bn takeover of offshore applications services pioneer Xansa.
What this means for suppliers is that they should expect clients to kick the tyres a lot harder in terms of assessing their global sourcing abilities. They should no longer see India as the single solution to their offshore plans, and should ask if its German client base could for example be supported from eastern Europe, or its US clients from Central or Latin America? What is the vendor's staff attrition levels like at its offshore delivery centres? Is the supplier able to offer more than just applications maintenance and call centre support? Can it deliver truly seamless support using the same process from multiple international locations?
The initial scramble for offshore headcount is over. The challenge for services vendors to build mature, adaptable sourcing networks has just begun.

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