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"The days of 30-40% growth are over, but the outsourcing industry is on the verge of significant change."

Alex Blues, IT Sourcing Expert, PA Consulting Group

Sourcing strategies increasingly centred on customer value

A special report from NASSCOM 2010

This year’s NASSCOM (National Association of Software and Services Companies) conference in Mumbai is an event that has grown to one of the largest global conferences, with over 1600 delegates, 120 speakers, 130 suppliers and 22 trade delegations promoting their country as an offshore destination.  Alex Blues, IT sourcing expert at PA Consulting Group provides his perspective on the conference, which revealed an industry on the verge of significant change.

Day 1 – cloud, collaboration and costs

Last year at NASSCOM, the recession was politely ignored but still the elephant in the corner, Mumbai was still reeling from the terrorist bomb attack and the Satyam debacle (external link) was in danger of wrecking the Indian outsourcing industry. Today, these issues have been forgotten and the atmosphere at the conference was upbeat, but there is still a sense of realism that the days of 30-40 per cent growth are ancient history. The key points of the day were:

  1. Cloud computing is going to dramatically change the industry

  2. Collaboration is key, be it across public and private sector, across continents, or across partners

  3. The industry will be challenged to find ways to support businesses to drive down the costs of services and products. 

Day 2 – recession, recession, recession

The speed of industry change is remarkable. Only two to three years ago, the talk at NASSCOM was about how far costs could be reduced and how it was difficult to differentiate between many of the companies' offerings.  Now talk is about added value and outcome-based pricing. The key points of the day were:

  1. The recession has forced more end users to increase the percentage of work going offshore

  2. The recession has been good for the industry which is now leaner and fitter - the downturn in the US and Europe has required companies to look at new emerging markets

  3. Governments in the West will come to terms with offshoring in the public sector in order to reduce costs.

Day 3 – Offshoring, delivering outcomes and flexibility

NASSCOM is no longer considered to be just an Indian outsourcing conference, it has a real global focus, with 22 trade delegations in attendance this year. Notable attendees included Colombia and Brazil, promoting their country as an offshoring destination. This will provide new competition for the traditional offshoring locations and as a result, force providers to deliver better value. The key points of the day were:

  1. Winners will be those that focus on the outcome not on the transaction

  2. Buyers will demand more flexibility and eternal contracts will become extinct

  3. Public sector transformation, particularly in the developing world, will provide the opportunity to make a real difference.

So what were the key trends of NASSCOM 2010?

There are three trends that we will see develop throughout the remainder of this year, and most likely beyond. Firstly, sourcing strategies are no longer about costs, but are now increasingly centred on customer value – a move that is being driven by supplier and customer alike. Linked to this, pricing models will change to being based upon outcomes not inputs. Lastly, platform-based solutions will gradually replace bespoke solutions in popularity.

To find out more about the key drivers of the outsourcing industry and how PA can help your organisation take advantage, please contact us now.

Adam Hughes
Sourcing consulting
contact us now