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10 IT outsourcing trends to watch in 2014

Stephanie Overby | Jan. 20, 2014
IT outsourcing experts tell us what to expect in the year ahead. And if they're right, this could be the year customers -- and a few robots -- take greater control of the IT outsourcing space.

7. A Lower Cost Consulting Model Emerges
This year, an increasing number of experienced IT outsourcing customers decided to forego the pricey third party consultants and set up their IT services deals on their own. Look for outsourcing consultants to adjust their approach in the year ahead. "In 2014, we'll start to see more consultants offer light-touch services for clients, often on annuity subscriptions, to service clients wanting ongoing relationships with less intense financial commitments," says Phil Fersht, CEO of outsourcing analyst firm HfS Research.

8. India Goes After Infrastructure
India Inc. made its reputation on application development and business process outsourcing. This year, they'll increase focus on infrastructure deals. "It would have been unheard of 10 years ago for an India-based provider to beat out an IBM, EDS, or CSC in an IT infrastructure deal in the United States or Europe," says Helms of K&L Gates. "I predict that 2014 will be the year where Indian-heritage providers become the biggest competitive threat for traditional U.S.-based infrastructure powerhouse providers."

Fersht of HfS Research forecasts a good year overall for Indian providers. "Many clients prefer the flexibility, work ethic, innovation, and cost-friendliness of many of the Indian IT services firms to the stagnating services of many of the Western incumbents, many of which will continue to lose market share in 2014," he says. "We expect this trend to continue apace in 2014."

9. Big Deals Get Smaller. Small Deals Get Bigger
Multi-sourcing continues to be the name of the game. "Prior mega-deals will continue to be disaggregated and resourced in smaller pieces," says Wagner of Alsbridge. At the same time, however, many smaller deals will be rolled up into midsize deals as customers seek more leverage with their vendors, Wagner says.

10. Governance Gets Harder
"With increased adoption of global business services and the growing complexity and diversity of vendor portfolios, the governance function will become an even more critical capability that enables organizations to manage performance, risk and compliance," says KPMG's Lepeak. "However, most organizations will face challenges in recruiting and hiring skilled resources due to a talent shortage in the governance arena."


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