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9 IT Outsourcing Trends to Watch in 2013

By Stephanie Overby, CIO
December 18, 2012 02:01 PM ET

CIO - This year the IT services industry saw a mixed bag of merger and acquisition activity (and regret), a more globally dispersed marketplace, increased focus on business outcomes, and--of course--more cloud build-up (and disappointment) than you could shake a stick at.

Lessons learned: Outsourcing managed services asked outsourcing observers to take out their crystal balls and look to the year ahead. And if they're right, 2013 could be a year of real growth for the industry--not as it relates to deal size or profit margins, but maturation on the part of both customers and providers.

1. Governance (Finally) Grows Up

Service providers, you're on notice. "Companies will have little patience for teams filled with contract negotiators and [service level agreement] number crunchers that have strangled their organizations of value," says Tony Filippone, executive vice president of research for outsourcing analyst firm HfS Research. "Expect to see governance upheavals as business-oriented leaders take the helm and meaty value-driven discussions with service providers dominate."

[Related: Is IT Outsourcing a Dying Concept?]

In addition, outsourcing buyers will seek better incident, problem, and change management. "Customers will require their suppliers to either integrate with or adopt cloud-based service management systems, such as ServiceNow, in order to have a common platform and single source of truth for service management activities," says Aaron Oser, a partner in the global sourcing practice at law firm Pillsbury.

2. Domestic Presence Becomes the Differentiator

Ten years ago, every outsourcing provider had to have a base in Bangalore. In 2013, they may have to set up shop in Birmingham or Boise to satisfy American outsourcing customers. "U.S. development centers will enable companies to source work at competitive rates and yet still maintain a certain level of control, high quality, and communication," says Scott Staples, co-founder of IT service provider Mindtree.

Ditto for those outsourcing customers with operations in Latin America and Europe. Local support will be key. "Sure, low cost locations will remain important, especially to European companies in desperate need of recessionary salvation," says Filippone of HfS Research. "However, the 'new global' really means demonstrating the capability for operations to seamlessly flow across centers around the world."

3. Do-It-Yourself Outsourcing Increases

"More and more customers have in-house outsourcing experience," says Shawn Helms, partner in the outsourcing and technology transactions practice of law firm K&L Gates. "Most major organizations have done many large outsourcing transactions."

Back then, they brought in armies of consultants and lawyers. Not in 2013. "More and more organizations will try to go it alone and perform major outsourcing transactions without the assistance of external consultants or lawyers," says Helms.

4. Flexible Pricing Matures

This year Jason Krieser worked on multiple deals with customers negotiating for-and getting-90-day payment terms. And that will become more common in 2013. "Customers are pushing very hard for this as a tight economy has customers managing cash flow at every opportunity," says Krieser, partner with the law firm K&L Gates.

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