Offshoring the Developers…

Marianne Kolding, research director with IDC (European Services Research

Group), has been in the field for eight years. She has a Masters in marketing

and international trade and has held key positions with IBM. Based in London,

she leads the practice responsible for IDC’s European research on business

solution services

What are the key drivers of outsourcing and where are the opportunities

for offshore service providers?



Outsourcing has always had a chameleon-like quality about its value proposition,
adapting to match its economic surroundings. The current economic climate

encourages a focus on cost although vendors also ensure that the client’s IT

infrastructure is "ready for the rebound." Today the overriding

proposition is cost. The opportunities lie mostly in the application development

and application maintenance areas–and increasingly in application management.

Although there is an opportunity in the US contact center market, the language

barriers in Europe pose a problem. Further opportunities can be found in parts

of the implementation of enterprise application. The processing services and BPO

segment is still in its infancy.

Which

are the emerging geographies in this space?



Across Europe, the UK has the highest acceptance of outsourcing. However, the
Netherlands and the Nordic countries, are also open to outsourcing propositions.

Developments such as the increasing popularity of mobile devices within the

enterprise and the medium-term emergence of Web services will not in themselves

be a major driving factor for outsourcing in Western Europe. They will, however,

serve to maintain or somewhat increase the general complexity in terms of skills

and competencies required of IT staff.

How can Indian IT companies make the most of these opportunities?



There are three main strategies that Indian IT companies can employ in order

to create successful business opportunities:

Nearly 100% offshore with few staff–mainly in sales. This model makes

strong alliances with services firms in Europe crucial for success. It is also a

vulnerable model since customer loyalty remains with the on-site service

provider.

Offshore/on-site hybrid: This is the most commonly found model today.

However, alliances with other service firms can be crucial due to national

loyalty shown in the market, particularly in the public sector.

On-site with offshore as a background operation. This will increasingly be

the model that will be deployed by offshore services firms. However, investments

in implementing this model are high and with the offshore capabilities being

just a part of the company’s total offering, the price differential that can

be used as a selling point will be reduced. The Indian firm will then be

competing with a number of local, and multinational providers.

What is the potential for growth in this segment?



Europe has only really started to open up to offshore outsourcing over the

past 3-4 years. However, Indian companies should expect increasing competition

from Eastern European countries, Russia, and the Baltic States.

Manjiri Kalghatgi in New Delhi