Overseas Businesses Stake on Offshoring

65% of businesses in the US, a way better half, send tech jobs offshore, according to an annual survey from Society of Information Management (SIM). The survey encompassed 275 US companies interviewing CIOs and senior IT leaders.

Even despite the sagging economy, companies aren't cutting IT budgets in 2012. The reason for this is that companies see IT as a valuable investment and businesses are trying to leverage IT to reduce costs instead of cutting IT to save money. In this respect, IT cost reduction becomes one of the least concerns of top management; the major – business alignment. The study revealed other IT priorities in business agility, business process management, strategic planning, reliability and efficiency, enterprise architecture, security and revenue-generating IT innovations.

The most in-demand services in offshore outsourcing are product and application development, application testing, and maintenance and support. Russia and Eastern Europe are among the most preferred emerging destinations, while India remains an established outsourcing spot for most US companies, followed by China and Latin America.

Source: ComputerWorld

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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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Hunting for New Geographies: Tips for Successful Outsourcing

In the search of better conditions and opportunities, it is natural for enterprises to look for new unexplored destinations for business. In the previous decades, the choice was mainly driven by cost factors, where India and China appeared as evident leaders in the global outsourcing space. Times, as well as value considerations, change and cost criteria cede to a more important asset such as untapped potential, for which emerging areas are increasingly being sought after.

Cultural affinity, mature infrastructure, and language capabilities are just among the few factors driving the hunt for new destinations in outsourcing. Eastern Europe and Middle East are among the regions that are nowadays experiencing high nearshore demand from clients in the United States and Western European.

When moving to new areas, it’s essential to consider multiple factors to succeed. Below we suggest a couple of tips for successful outsourcing to emerging destinations:

• Local knowledge and understanding of specific contexts of each region is essential.

• Risk diversification is important. There needs to be a right balance between offshore, onshore, and nearshore activities.

• In the current scenario, economic stability in different regions is an important factor to be considered.

• And finally, scalability is another factor that becomes important in the long run. Estimate the demographic and IT potential of each region carefully in terms of scalability and growth.

Source: Global Services

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Gartner Forecasts Enterprise IT Spending to Reach $2.7 Trillion in 2012

Despite the global economic uncertainty, Gartner analysts anticipate that the worldwide enterprise IT spending will experience a 3.9% increase next year reaching the total of $2.7 trillion. Enterprises will continue to invest heavily in their IT infrastructure seeing it as the major drive of business growth.

Peter Sondergaard, Senior Vice President at Gartner and Global Head of Research, underlines the importance of IT: “The days when IT was the passive observer of the world are over. Global politics and the global economy are being shaped by IT. […] For example, this year 350 companies will each invest more than $1 billion in IT. They are doing this because IT impacts their business performance.”

An increase in the IT services demand, consequently, means more projects for IT vendors, where especially outsourcing services are increasingly sought after. Gartner particularly notes, that emerging markets will continue to get closer attention in the coming years, in particular rising economies. According to Gartner’s estimations, the emerging economies will account for $1.013 trillion in 2012 of the global IT spending of nearly $3.7 trillion. Considerably in demand are ASM & infrastructure services, software testing, and offshore software development. Russia, Ukraine, Poland, and Belarus are currently most promising outsourcing spots luring more and more international customers from Western Europe and the US.

Source: Global Services

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Untapped Opportunities in the Heart of Europe

Despite being one of Europe's most controversial countries, Belarus, favorably located between Western Europe and Russia, is among one of the IT leaders in Central and Eastern Europe providing unmatched ITO opportunities and having one of the biggest potential among CEE counterparts. IT outsourcing is one of the fastest-growing branches in the country and is one of the most robust segments in the country’s economy. Just consider one fact, for the first half of 2011 Belarusian IT companies have reported a 55% increase in their software and IT services export.

Having gained independence about twenty years ago, Belarus has rapidly grown and developed in the last years with all the values of the Western culture. And although it does retain some traits of the Eastern mind, the country is much West-oriented. Keen to cut costs, Western companies are increasingly seeking new destinations for outsourcing, and Belarus is a great opportunity nearshore which has a lot to offer in terms of tech skills.

Belarusian education is one of the strongest supporting factors. Every year, Belarusian universities graduate about 3,900 specialists with ICT and related technical skills. Because of the high quality of technical education, Belarus has the reputation of a country with a high scientific potential and an essential pool of IT talent. Belarusian software engineers undergo training in the training centers of IBM, Lotus, Sun, Novell, Microsoft, and other world IT leaders. In fact, when it comes to dealing with complex software development tasks, the ones who outshine all others are the developers from Belarus. Product development, software testing, and ASM & infrastructure services are among the strongest sides of the Belarusian IT sector.

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Krakow: The Next Big Thing in Outsourcing

Poland is a key market for software outsourcing in Eastern Europe and a favorably located entryway into the region with the business style and culture that has a lot in common with Western Europe and North America. Poland's highly concentrated IT marketplace is one of the most preferred outsourcing destinations nowadays increasingly attracting overseas attention.

Poland’s Krakow, commonly referred to as Europe’s “Silicon Valley”, represents Central and Eastern Europe’s technology hub. The city is the second-largest in the country and is one of its most important economic centers. Krakow is viewed as an optimal choice to conduct business, also proved by such global leaders as IBM, Capgemini, HCL, Hewitt, LogicaCMG, Philip Morris International, AES, Microsoft, who have their offices in the city. All in all, firms from the outsourcing sector employ 16,000 workers in 50 development centers within the city.

Established back in 1998, Krakow Technology Park (KTP) is one of the most significant factors of Krakow's investment attractiveness. KTP is the city’s high-tech powerhouse harboring 15 higher education institutions and over 140 research centers. Special conditions are provided for investors in the branches of IT, electronics, communications, software and hardware, and material engineering.

The intellectual potential of Krakow is supported by 22 universities and 210,000 students in higher education – more than 30,000 new graduates a year, of which 8,000 are IT sciences graduates. There are altogether 8 universities in Krakow with IT degrees, among which the AGH University of Science & Technology and the Cracow University of Technology are the largest.

The demographic potential is another benefit of Krakow – approximately 8 million people live within a 100 km radius of the city. It is noteworthy, that about 60% of the city inhabitants are under the age of 45.

Many European IT companies chose Poland as their preferred outsourcing destination because of the communication, cultural, territorial, and quality issues that they find an essential advantage in software and IT services outsourcing. Poland is the country that is able to respond to most challenging IT outsourcing issues even for most demanding customers.

Source: Global Services

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Ukraine as an Outsourcing Hub

Ukraine is named among the most promising destinations for the future of outsourcing. Strategically located in the center of Europe and geographically close to major European clients, Ukraine offers cost effective, but highly qualified workforce, rapidly improving infrastructure with the upcoming EURO-2012 football tournament, favorable investment climate, and cultural similarity.

IT services sector is one of the cornerstones of the Ukraine development strategy and one of the priority branches. For several consecutive years, Ukrainian IT outsourcing industry shows sustained growth, in spite of the dramatic fluctuations on the global financial market. For the last five years the volume of the Ukrainian IT services export has doubled – reaching today’s $ 1 billion, which makes it is the fifth in the world. It is a good prove of the industry’s potential and a weighty argument for launching long-term projects in the region.

Ukraine is also distinguished by a high level of technology skills and scientific potential. Each year more than 30,000 new specialists graduate from Ukrainian universities; technology and engineering branches are among the most intensively studied. Since the country was a major hub of scientific research of the Soviet Union (40% of the total share), there is deep heritage of strong skills in software engineering. Ukraine boasts strong potential for supplying highly qualified and well-educated workforce with innovative and creative thinking to develop new products and solutions. Moreover, IT engineers have European mindset and good English skills which facilitate everyday communication and help them better perform tasks.

The outsourcing industry is particularly well-developed in the country’s biggest cities: Kyiv, Kharkiv, Lviv, Vinnytsia, and Dnipropetrovsk. Ukraine is constantly trying to improve its capacity to better accommodate IT needs, and is likely to become soon a major destination for software outsourcing in Central and Eastern Europe.

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