2Q10 EquaTerra Advisor and Service Provider Pulse Survey Results
Dynamic Models Such as SaaS, BPaaS and Other Cloud Services Stall Review Cycles
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Introduction
EquaTerra is pleased to release the findings from its 2Q10 EquaTerra advisor and business and information technology (IT) service provider Pulse surveys. Through these surveys, EquaTerra has developed a highly informative gauge that provides quarterly insights into trends and projections in the outsourcing and third-party business and IT service markets, gleaned from its own field advisors and leading global service providers. EquaTerra’s advisors are the leading experts on business and IT services, assisting buying organizations actively exploring or undertaking shared services, outsourcing, offshore and other service delivery alternatives.
Since their inception in 2004, the EquaTerra advisor and service provider Pulse surveys have yielded insightful analysis of current and ongoing market trends. They capture changes in demand, scope, capacity and related key market indicators. They highlight the changes, and the direction of change, in the business and IT service industry as a whole. The surveys focus on where the market is going and how that direction is changing – or not – compared to prior quarters and years.
In addition to the global advisor and service provider Pulse surveys, EquaTerra conducts service provider Pulse studies in the UK and the Netherlands, recently launched a twice yearly legal Pulse survey, and periodically conducts additional function- and industry-specific studies. A source-to-pay outsourcing service provider Pulse survey is planned for later this year.
This edition of the advisor and service provider Pulse surveys reflects business and IT service market activity during 2Q10 (April through June 2010) as well as market demand and top trend predictions for the balance of 2010 into 2011. Topics explored include:
- Demand and buying patterns, including the impact of the economy on the demand for outsourcing and related third-party business and IT services
- Buyer trending on the use of multi-sourcing and multi- provider sourcing models
- “Cloud computing” adoption and trending and its impact on commercial enterprise software systems and traditional outsourcing
- Outsourcing deal scope, sales cycles, pricing, contract value and profitability
- Service provider pursuit and delivery capacity
The Pulse surveys focus on using outsourcing and other third-party services to support the following functional areas: customer care/call center, finance & accounting, human resources, information technology, knowledge process outsourcing, procurement, and vertical industry business services. |
The following leading global business and IT service providers were polled for this quarter’s sell-side survey:
- Accenture
- ACS, a Xerox company
- ADP
- Atos Origin
- Caliber Point
- Capgemini
- Ceridian
- Cognizant
- Convergys
- CSC
- Genpact
- Getronics
- HCL Technologies
- HP
- IBM
- ICG Commerce
- Infosys
- Mercer
- Outsource Partners International
- Patni
- Steria
- Syntel
- TCS
- Unisys
- Wipro
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Conclusions
Business process outsourcing (BPO) and IT outsourcing (ITO) market demand continued to grow in 2Q10 but at the same sluggish pace witnessed last quarter. Inherent outsourcing demand and service provider pipelines continue to grow faster than the volume of deals being consummated as the pace of deal flow and buyer sourcing efforts remains uneven and often disrupted. This is a result of more cautious buyers that are very hesitant to make any major upfront outlays to support outsourcing efforts or enter into larger, more complex and uncertain deal arrangements.
Buyers remain aggressive about reducing and keeping down operating costs, continuing to overhaul service delivery models, trends that are positive for long-term outsourcing growth. Buyers continue to employ internal process improvement efforts or alternative service delivery models, like shared service centers, as a complementary or alternative means to outsourcing to enable these change efforts.
Buyer interest in cloud computing and its derivatives, as a complement or alternative to traditional outsourcing and commercial enterprise software models, continues to grow. Most buyers are dabbling in one or more elements of cloud computing, but are not yet managing these efforts under a formal cloud computing strategy. Defining and executing such a strategy as soon as possible are important to ensure coordination and prioritization of the most relevant cloud computing efforts in addition to maximizing the value from the investment long term. Buyers must work to improve their cloud computing skills to support these efforts and ensure their success.
The consensus is that long-term traditional enterprise software system vendors and legacy outsourcing service providers will adopt and in some cases co-opt new cloud computing capabilities and models to expand their offerings. While new cloud computing service providers will enter and excel in the market, legacy vendors and providers that can successfully evolve and integrate cloud computing capabilities into their offerings will survive and thrive.
The range of functions and processes that buyers deem in-scope for outsourcing continues to grow. This includes both new process areas in more mature back-office functions, as well as more activity in less mature outsourcing areas like legal process outsourcing (LPO), real estate and facilities management (RE & FM), and pharma research and development. This bodes well for the long-term growth of the overall outsourcing market. |
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The use of multi-sourcing or multiple outsourcing service providers in adjacent and complementary functional areas continues to grow. While this is inevitable given the ongoing growth of outsourcing, it is important that buyers work diligently to balance the benefits of best-of-breed sourcing scenarios with the added cost and complexity of managing them. The growth of cloud computing opportunities to complement, extend, and in some cases supplant traditional outsourcing will further drive more multi-sourcing, at least in the short to medium term, as new service providers come to market. |
EquaTerra controls distribution of the Pulse survey reports, which are intended for internal use and select delivery to EquaTerra clients, prospects and other marketplace representatives. Questions or comments regarding these surveys should be directed to Stan Lepeak, Managing Director of EquaTerra Global Research, +1 203 458 0677.
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