Outsourcing of IT Services in Capital Markets

Global financial services companies are aligning their IT strategies and priorities along with the developing market and business conditions.

According to a recent study from Everest Group on the trends and future outlook of IT outsourcing in Capital Markets, the volume of large-sized, active capital markets transactions grew four-fold from 2008 to 2010. A large part of such large capital markets deals are structured around application development, ongoing enhancements, and maintenance.

Everest Group stated the key imperatives for capital markets firms today as:

• Alleviating risk and complexity caused by uncertain global economic environment and wide scale regulatory reform;

• Managing trade volatility to streamline front-office operations and modernizing the clearing and settlement function in mid- and back-office;

• Building “region-specific” expertise to drive the global growth agenda, given that capital markets’ operations across geographies are facing disparate challenges.

In terms of offshore software development, Ukraine is positioned as an unrivaled best choice with regional market-specific expertise. Financial giant Barclays Capital, for example, opened its technology center in Kyiv in 2010 and sees Ukraine as a key strategic destination within its technology growth plans.

Source: Global Services

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Collaborative Sourcing As a New Transformational Approach

Is outsourcing outdated? Yes, collaborative sourcing is currently on the rise.

Application collaborative sourcing is a delivery framework that provides ongoing development and maintenance of an enterprise's full application portfolio. The framework model provides a platform to drive innovation and focuses on time-to-value while introducing working collaborative practices to get critical business functionality into production at a fast rate.

A core theme of collaborative sourcing is improving the business's capability to compete on time. The collaborative sourcing argument is that if we wish to accelerate time-to-value, we need to measure factors of time at the lowest levels of granularity possible.

Collaborative sourcing accelerates time-to-value. Through a set of Web 2.0 technologies and an integrated set of processes, collaborative sourcing focuses on cycle time (elapsed time) and speed (hours vs estimate) as the principal metrics for measuring performance.

Staff behaviors are directed toward competitive, time-based outcomes when not only development methods, but also the talent model and recognition systems, are calibrated on time-based measures.

Collaborative sourcing is a true transformational approach to an enterprise's applications development and maintenance strategy. In addition to providing the mechanism to realize the benefits of global delivery and continue significant cost reductions, collaborative sourcing creates the engine to accelerate time-to-value. Rather than focusing almost exclusively on cost takeout, collaborative sourcing refocuses a CIO's capabilities and resources toward adding value to the business through accelerated time-to-value and outcomes-based measurement processes.

Source: Global Services

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European Trends in ITO for 2011 (Part II)

As promised in the previous post, here comes the continuation on the development tendencies of the European ITO market in 2011. Judging from the perspective of ITO services providers, the following trends and changes are anticipated:

It is expected that an increased demand to adopt outsourced IT services will come from the SME segment. This will force service providers to anticipate smaller and, thus, less profitable deals. To ensure more significant profits in the long term, IT providers will have to improve their adding-value service offering, cloud capabilities and modify current engagement models to help SMEs grow their business and, as a result, to benefit from their clients' growth.

Secondly, innovative outsourcing engagement models are anticipated to hit the mainstream. Outsourcing entire product or application development processes, the companies will demand from their potential partners transparent cost structures, no hidden agenda, options to easily scale up or down in compliance with the current business situation, etc., which makes service providers diversify/innovate their engagement offerings.

And the third trend reveals itself in the breakdown of the client-silo approach. As businesses aim to learn more best practices by sharing knowledge with their peers across different industries, IT providers will be challenged to transform their client-silo mindsets and encourage collaboration between clients from various industry domains.

All in all, 2011 promises a prosperous but at the same time challenging year for European ITO with focus on agility, processes optimization, transparency of transactions and payments, innovation, and cloud. But we’re looking with optimism into the new 2011!

Source: EzineMark

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European Trends in ITO for 2011 (Part I)

Well, another year is here with its new perspectives, new hopes, new aspirations, as well as new plans and strategies. At the very start of the year we bring to your notice IT Sourcing Europe’s outlook on the European ITO market and future development trends and relations between Western European ITO services buyers and Eastern European ITO services providers.

Judging from the perspective of ITO services buyers, the following trends and changes are anticipated in 2011:

One of the most vivid tendencies – which came from 2010 with over 9 billion Euro in contract value and is anticipated to further increase in 2011 – is the increased demand for outsourced IT services from the public sector. The demand for cost-effective outsourcing opportunities in this sector is primarily explained due to recent turmoil in such countries as Ireland and Greece as well as economic uncertainties in other EU member states.

Secondly, there is traced a shift from mere cost saving to access to qualified and lower-cost IT resources. Already in the previous year Western Europe faced a significant shortage in skills and resources in the branch of software development; Eastern Europe, on the contrary, showed a significant increase in IT workforce led by Romania with a 12.33% growth in the number of IT specialists and followed by Ukraine with a 9.51% growth.

Closely connected with the above comes the third trend: nearshoring will hit the mainstream. Of almost 2,000 non-outsourcing companies polled in the survey, more than 22% plan to transfer their IT/software development nearshore versus only 11% of those who plan to outsource offshore.

And last but not least, service integration will help achieve innovation. In 2011, more Western European IT leaders are expected to realize the importance of integrating the outsourced project management, orchestration and delivery, thus gaining full control of their sourced projects.

In the second part of the post we’ll dwell on the trends and changes which are anticipated in 2011 judging from the perspective of ITO services providers.

Source: EzineMark

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Western Europe’s Outsourcing Trends

Western Europe, the second largest outsourcing market after the US, is characterized by a pretty diverse behavior in terms of software development outsourcing habits. The latest trends and key similarities and differences in ITO engagement were recently highlighted in a report by an independent IT outsourcing (ITO) research and advisory company IT Sourcing Europe. The report is based on a comparison analysis of corporate outsourcing behaviors in the United Kingdom, Denmark, Germany, Switzerland, Netherlands, and Austria.

Below are some thought-provoking findings for nearshore and offshore software vendors:

1. Regarding the most popular outsourcing destinations in 2010, the majority of the UK and Dutch companies (23% and 29% respectively) outsource their software/web development offshore (i.e. India, China, Philippines, Pakistan, etc.), while most of Danish (34%), German (37%), Swiss (41%), and Austrian (32%) companies prefer nearshoring when it comes to outsourcing software development (Eastern Europe and the Baltic states are among the most popular destinations).

2. Regarding the future outsourcing destinations, the equal number of the UK outsourcers (28% and 28% respectively) will place their software development function nearshore and offshore; the majority of Dutch companies will be sourcing nearshore (27%), while Danish, German, Swiss, and Austrian companies will continue outsourcing nearshore (25%, 31%, 32%, and 30% respectively).

3. Regarding the actual savings from the outsourced development, most of the UK (36%) and Danish (27%) companies save 40% to 59% of their operating costs, while majority of Swiss (35%), German (38%), Dutch (28%), and Austrian (31%) companies manage to save 10% to 24% from their outsourced development.

More interesting findings will be available in the European ITO Intelligence Report 2010 to be released in December 2010.

Source: IT Sourcing Europe

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Outsource to Get Better Performance

The first thing to come to mind when talking about outsourcing is cutting costs. Or at least it was so… One of the modern trends for outsourcing providers today is to deliver excellence and quality, and consequently businesses are increasingly outsourcing to improve their performance. As Allie Young, VP at Gartner, said the shift towards enhancing business through outsourcing is a sign of a "maturing market".

Buyers of IT outsourcing anticipate increasing its use over the next two years and 88 per cent of the organisations currently outsourcing expect moderate to high levels of outsourcing compared to 67 per cent in 2007".

About 85 per cent of Europe, the Middle East and Africa organisations expect to continue at the same level or increase their outsourcing during the next two years, up from 62 per cent in 2007".

Source: Silicon.com

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Everest Reveals Q2 Trends in Outsourcing

The Everest Research Institute’s Market Vista: Q2 2008 Report on global outsourcing and offshoring revealed that, despite the unstable economic conditions in the United States, the outsourcing market continues to stably grow with help from European investments. Europe accounted for 41% of all outsourcing contracts in the second quarter, signing 417 new outsourcing contracts (70% of which were ITO, 28% of which were BPO, and 2% of which were both ITO and BPO) with a contract value of $2.6 billion dollars. Similarly, the report demonstrated an increase in the use of the captive model, in which a company builds a captive offshore center to either eliminate the middleman (thus saving money) or to exercise total control over outsourced operations. Additionally, Everest, based on the Q2 report’s profiles of outsourcing activity in Central and South America, deducted that labor savings in Brazil, Chile, and Mexico, will not be realistic for the next five to ten years.

According to the Everest Q2 Report, the outsourcing market experienced a 3% growth in outsourcing contracts compared to the first quarter. This growth is largely attributed to Europe (particularly the UK, whose outsourcing activity has gathered incredible speed) where contracts were signed in the UK, Germany, Sweden, and Switzerland with manufacturing and telecom industries. Fifty four deals were made with financial services in the second quarter, with $240 in annual contract values; a marked increase was seen in the amount of these contracts signed by North American companies - 41% compared to 26% in the first quarter. The captive model, despite much negative speculation, is also growing in popularity; with 18 new set-ups and 3 divestitures, the 2008 total for captive offshore centers has totaled 34 set-ups and 6 divestitures.

Source: Everest Research Institute

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European Outsourcing: current state of affairs and future trends

TEAM International shared some findings of the latest Annual Outsourcing Survey conducted by Ernst & Young. The 2008 survey questioned more than 600 members of upper management in the largest European companies with a turnover of at least 100 million Euros. The survey came up with these findings:

• 70% of respondents reported outsourcing at least one business process to lower-cost countries;

• 49% of respondents agreed that offshore outsourcing served as an efficient cost saving tool;

• 33% pointed to better quality through hiring the specialists among the major reasons for outsourcing;

• At the industry level, the finance industry is reported to be the most mature in adopting outsourcing; banking is considered to be the most focused on IT and telecommunications outsourcing with a 75% take-up rate;

• Medium-sized companies and multinationals are the major users of offshore outsourcing;

• The majority of respondents generally report positive experience they have had with offshore outsourcing.

• 20% of European companies admitted intending to increase their outsourcing level within the next two years.


Source: Ernst and Young

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Demand for IT Outsourcing in Central and Eastern Europe is improving again

This week EquaTerra’s analysts published the results of their 3Q07 Pulse Surveys. Against the background discussions of 2008 outsourcing trends – whether the demand will go significantly up or drastically down – the EquaTerra’s findings look pretty optimistic.
Particularly, the survey revealed that demand for Information Technology (IT) outsourcing is improving and is especially strong in the Europe, Middle East and Asia (EMEA) markets.

The pick-up in outsourcing demand is strong across all major industries, and is occurring even as growth in many vertical markets, such as financial services, is challenged by a range of economic and demographic challenges.

Key trends identified in EquaTerra's 3Q07 Pulse Surveys include:

• Globalization of Outsourcing: The use of remote, lower cost offshore resources to deliver ITO and BPO services continued to grow during 3Q07. However, wage inflation in leading offshore markets like India and the falling value of the U.S. dollar negatively impacted margins of service providers with extensive offshore operations. This, coupled with changing buyer demands and the need for service providers to access talent with more diverse skills, further drove the expansion of delivery capabilities beyond the Indian market into locations like China, Central/South America and Central/Eastern Europe.

• Overall Outsourcing Demand Growth: 51 percent of EquaTerra advisors noted that demand for outsourcing services was up in 3Q07, and their outlook for 2008 was optimistic. Demand growth was strongest into the ITO market segment and in the EMEA market geography.

Stan Lepeak of EquaTerra noted: "The findings from our 3Q07 Pulse Surveys are generally positive in terms of the growth, maturation and globalization of both the ITO and BPO markets. While buyers still experience challenges with their outsourcing efforts, overall results have met or exceeded expectations, which has enabled outsourcing to become a commonplace tool that - regardless of broader economic and market conditions - buyers employ in an effort to improve their process delivery and reduce operating costs."

Supposedly Q4 results will add bright colors to the analysts’ sentiments, especially regarding software development outsourcing in Central/Eastern Europe and Russia.

Source:EquaTerra

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