2008-01-31

Worldwide Outsourcing Market to Grow 8.1 Percent in 2008

The global outsourcing market continues to grow at a steady pace, with a forecast growth rate of 8.1 percent in 2008. But healthy growth rates for outsourcing do not necessarily mean that user organizations are without challenges, says Gartner.

"Although user organizations often have fundamentally sound procurement organizations to initiate outsourcing contracts, for many, their IT sourcing strategies and governance structures are still immature, lacking altogether, or misaligned with enterprise objectives" said Kurt Potter, Research Director at Gartner .

He added: "Because these organizations lack the basic building blocks for successful vendor management and outsourcing success, expected cost savings and other benefits are difficult to obtain. In extreme cases, the lack of needed trust and control to optimize the outsourcing relationship results in deal failure. Also, more organizations focused less on outsourcing for cost savings than in previous years and more on using providers' global delivery models to access the right skills at a reasonable price, wherever they are."

Although outsourcing continues to grow, publicly reported IT outsourcing (ITO) and business process outsourcing (BPO) contract values decreased overall by 50 percent in 2007. Part of the explanation for this apparent discontinuity is that as the outsourcing market matures and becomes more commonplace, there is less publicity of deals. Companies are simply outsourcing more, but electing to use a multi-provider strategy and more deals are simply smaller in size, with many of these deals not large or ground shaking enough to report.

"In 2008, we expect to see some early adopters of multi-sourcing to consolidate around fewer providers to reduce their service integration costs and harvest the benefits of better relationship management with fewer strategic suppliers,"said Potter. "Because of multi-sourcing complexities often associated with handoff points between competing providers and un-clarified vendor management processes, some organizations will consider prime-contractor outsourcing models or the appointment of new vendor management roles in their retained organizations."

Source: http://www.ciol.com/content/17108102862.aspx

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