Monday, May 31, 2004

Outsourcing: The Main Driver for Growth in IT Services?

China Sourcing Alert    
Sunday, May 30, 2004
Dateline: Qingdao, Shandong, China
Outsourcing: The Main Driver for Growth in IT Services?
If you believe Gartner ( ), "Outsourcing continues to be the main source of growth in IT services, and has become a mainstream business practice for companies of all sizes.  According to Gartner, Inc., in 2004, outsourcing will account for 53 percent of the total worldwide IT services market, and will make up 56 percent of the market by 2007."  Wow!!
This is even better:  "Outsourcing is becoming the dominant way that enterprises buy IT services" (my emphasis).  Gartner claims that everyone is rushing to deploy a global delivery model (GDM).  Why?  Answer:  So enterprises can tap into IT resources anytime, anyplace, with one of the objectives being to REDUCE risk.  Their point about risk REDUCTION is interesting since offshoring tends to be viewed as increasing risk, NOT reducing risk.  Clearly, in this case, execution is everything.
Gartner goes on to claim that only G2000ish firms will rely on captive development centers and that most firms will do their global sourcing via "the GDM of an outsourcer."
Bottom line:  China's SIs need a global delivery model (GDM).  In China, I've seen only one firm with something that truly resembles a GDM.  However, their GDM is strong on project management (matter of fact, their project management skills are on par with IGS, Accenture, EDS, TCS, Infosys, Wipro, Satyam), but fails to address onsite (i.e., in the States) issues.  Another firm has a good onsite presence to serve one specific client (a U.S. F10 company), but they didn't show much in the way of project management or software development management expertise.  They may have both, but it wasn't clear from what I've seen.  Also, the Gartner forecast points, once again, to the ripening of the mid-market.  Mid-market opportunities are boundless.  Solution:  China's SIs should develop a GDM for serving the mid-market in the States, i.e., catered to mid-market end users (CIOs) and mid-tier U.S.-based systems integrators (SIs) focused on servicing mid-market clients.
David Scott Lewis
President & Principal Analyst
IT E-Strategies, Inc. (access to blog content in China) (AvantGo channel)
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