Offshore Futures Report Preparing for global sourcing

Transcription

1 Offshore Futures Report Preparing for global sourcing

2 Contents Acknowledgements 03 Executive summary 04 Key questions 06 Introduction 07 Methodology 08 Key Themes Theme one: Expanding scope 09 Theme two: Supplier consolidation 11 Theme three: New pricing models 12 Theme four: Componentisation and standardisation 14 Theme five: Multi-location sourcing 16 Theme six: The need for expertise 19 Theme seven: The end of the backlash for most 22 Offshore Futures: a checklist of challenges 25 Offshoring is growing up 27 Conclusion 28 Appendix 29 Bibliography 30 Intellect s Outsourcing and Offshore Group Offshore Futures Report: Preparing for global sourcing

3 Acknowledgements Acknowledgements Author: Paul Morrison, Director, Alsbridge; Board Member, National Outsourcing Association Alsbridge plc is an award winning specialist advisory firm providing guidance on outsourcing, shared services and offshoring. Focus areas include feasibility assessment, strategic advice, supplier selection, contract negotiation, implementation and mid-contract review. Alsbridge has expertise in sourcing across a range of industries and functions, with in-depth knowledge of suppliers and offshore locations throughout the world. Alsbridge is completely independent, and is focused on working collaboratively to deliver competitive and sustainable sourcing solutions. T E paul.morrison@alsbridge.eu W Editor: Hilary Robertson, BPO Strategy Director, Steria The leading end-to-end IT and business services provider in Europe for companies which consider new technologies a vital part of their strategy, Steria focuses on setting up strategic partnerships with its customers in each of its key markets: the public sector, finance, telecommunications, utilities and transport. Steria offers customers integrated services including consulting in core business processes as well as the development and operation of their information systems. In October 2007, Steria acquired the British IT and BPO firm Xansa, a market leader in Finance and Accounting services. The new group employs over 19,000 staff in 16 countries including Poland, Morocco, Singapore and over 5,000 in India. On December 31, 2007, Steria revenue amounted to 1.4 billion ( 1.9 billion pro forma). The group, headquartered in Paris, is listed on the Euronext Paris market. T E hilary.robertson@steria.co.uk W The paper was also shaped through discussions with Dr Richard Sykes, Chair, Intellect s Outsourcing and Offshore Group, and other members of the Group: 1st Advisory Sopra Group Northgate Information Solutions Wragge & Co Offshore Futures Report: Preparing for global sourcing 03

4 Executive summary Forward thinking? Offshoring is one of the key factors shaping UK and global business. Yet there is surprisingly little consensus on how offshoring is developing, its impact on the UK economy, or how businesses can best tap into the emerging world of global sourcing. The Offshore Futures Report project aims to fill this gap. The project was initiated to investigate the direction of offshoring over the next five years, to enable stakeholders including user organisations, suppliers, and policymakers to more actively prepare for the future. To sample opinion on offshoring, a wide range of potential future trends was set out in the form of a survey. This was then sent to industry experts to identify the most significant trends for the next half-decade. Offshore maturity The survey uncovered a wealth of opinion on offshoring, from which seven key themes emerged, with clear implications for organisations doing business in the UK and beyond: 1. Expanding scope 2. Supplier consolidation 3. New pricing models 4. Componentisation and standardisation 5. Multi-location sourcing 6. The need for expertise 7. End of the backlash for most The various themes of this survey reveal a clear common message: offshoring is set to grow, mature and evolve. Trends such as consolidation, standardisation, and commoditisation are the classic signs of a maturing industry. An end to the political debate on offshoring (for most sectors) further points to growing acceptance that global sourcing is an established part of the business landscape. It is no longer possible to view offshoring as the wild west of the service economy: it is morphing into a widely used, trusted, integral part of business operations for many types of organisation. 04 Offshore Futures Report: Preparing for global sourcing

5 Executive summary Time to focus In this era of evolving offshoring, there will be new types of services to invest in, new ways of working offshore, and new global risks and opportunities. It will become possible to achieve more with offshore outsourcing and offshore captive delivery centres. It will also be increasingly difficult to ignore global sourcing altogether. Going forward, offshoring will be something that successful organisations should seek to more actively plan, manage and optimise, to a greater extent than they do today. Within their companies they will be able to identify offshoring teams, work with external advisers, and set out long-term sourcing strategies that co-ordinate the sourcing of increasingly complex service supply chains. In short, the world s best run organisations will get serious about offshoring. They will recognise that although the offshore services industry has indeed become business as usual, global sourcing has a considerable way to go. This may give rise to an increased number of senior global sourcing personnel, able to work and negotiate effectively across cultures, national boundaries and time-zones. Impact of the credit crunch Although the survey was carried out prior to the financial and economic volatility of autumn 2008, it did explore the potential impact of an economic downturn. It indicated the view that in the event of a sustained recession, there will not be a significant increase in opposition to offshoring, and as a result the spread of global sourcing will continue. Indeed some commentators are predicting that the credit crunch will accelerate the growth in offshoring: In the current financial climate, many businesses will turn to outsourcing, and offshoring in particular, to drive out operational efficiencies. In a buoyant market, many firms want to offshore; in a difficult market, many firms need to offshore. Tim Lloyd, Managing Partner, Alsbridge "At present the jury is still out on how a recession might impact the offshoring market. However the emphasis of offshoring will start switching away from the strategic and global and back towards the low-cost. Mark Kobayashi-Hillary, National Outsourcing Association, and author of Who Moved My Job? However, the economic and political parameters are not fixed. New UK immigration rules will be implemented at the end of 2008, an election is expected in 2010, and should unemployment rise in the coming months, the government will be under robust pressure to protect jobs. Offshoring may yet get caught in the crossfire. Offshore Futures Report: Preparing for global sourcing 05

6 Key questions How will organisations keep control of increasingly offshore complexity? Which type of suppliers will thrive in the market? Will China overtake India as the largest offshore location? Will the public sector embrace offshoring? What impact will recession have on offshoring? where is offshoring going? 06 Offshore Futures Report: Preparing for global sourcing

7 Introduction Business as usual? Offshoring has rapidly emerged as one of the most dynamic influences on UK and global business. For many organisations, offshoring has become business as usual in a relatively short space of time. Unlike the centuries-old globalisation of manufacturing, the global sourcing of services dates back for no more than a few decades. It was pioneered by a few firms in the 1980s and 1990s, and later launched onto the world stage by the sourcing of IT work to India at the turn of the millennium. Today, the term offshoring is well established in the lexicon of a wide range of industries such as banking, insurance and pharmaceuticals (see What is offshoring? ). Despite the occasional headline pointing out the failure of a few offshore programmes, the trend has been accelerating. Today, it is no longer remarkable that an organisation sources programmers from India, accounting clerks from Hungary, or call centre agents from South Africa. Whilst offshoring was once revolutionary, it has now become accepted business practice. However, offshoring remains poorly understood. Debate in the past few years has been dominated by an often emotional discussion on the politics of global sourcing. For one of the key factors affecting the UK economy, and international business in general, there is surprisingly little consensus on where offshoring is going, its impact on the UK economy, the demand for skills or the best way for organisations to manage global sourcing operations. The Offshore Futures Report project aims to fill this gap. The project was initiated to investigate the direction of offshoring over the next five years, to enable stakeholders including user organisations, suppliers, and policymakers to more actively prepare for the future. To sample opinion on offshoring, a wide range of potential future trends was set out in the form of a survey. This was then sent to industry experts to identify the most significant trends for the next half-decade. Seven key themes The project has uncovered a plethora of views on offshoring, generating opinions from all sides of the debate. Almost every trend had some advocates, and some detractors. The scale and variety of the responses points to the fact that the subject remains a key issue for UK companies. Yet despite this loud and varied response, seven key themes emerged, which reflect the centre of gravity of opinion in the survey: 1. Expanding scope 2. Supplier consolidation 3. New pricing models 4. Componentisation and standardisation 5. Multi-location sourcing 6. The need for expertise 7. End of the backlash for most The following sections will explore each theme in turn (for a listing of the top 10 and bottom 10 trends by significance score, please refer to the Appendix), followed by an appraisal in the overall implications of these findings. What is offshoring? Offshoring can be interpreted in a number of different ways. In this report, offshoring represents the cross border provision of services such as IT, and other IT-enabled services including, finance HR and claims processing. Offshoring can be carried out both internally within an organisation through in-house captive delivery centres, or externally through outsourcing to third party suppliers. Offshore Futures Report: Preparing for global sourcing 07

8 Methodology Approach This paper is based on the results of an online survey conducted by Intellect in the summer of It should be noted that the survey was conducted prior to the financial market volatility of September/October In order to gather as wide a spectrum of views as possible, Intellect s Offshoring and Outsourcing Group developed a framework of 43 potential trends, grouped under the following headings: demand supply management technology politics location strategy The trends were positioned as statements. Respondents were then asked to rate the significance of each trend over the next five years or so. The range of suggested trends was deliberately broad. Covering concepts raised in current debates, and others generated by the Offshoring and Outsourcing Group, it included some trends that could be seen as mutually exclusive, and others that could be viewed as complementary. The framework was constructed to be as flexible as possible, allowing the survey respondent to individually score the future significance of each trend. For a link to the complete trend framework, please visit Breakdown of respondents The survey was sent to a range of industry experts, including Intellect s membership, and presented to other organisations and individuals with an identified interest in offshoring. A total of 94 responses were received. Just under half of respondents classified themselves as suppliers, with advisers, end users, analysts and academics making up the remaining half. Analysis of the results The aim of this paper is to highlight ideas and points of focus for further debate and exploration, supported by a broad, statistically significant sample of stakeholder opinion. Whilst every care has been taken to clearly articulate the trends in the survey, the potential for differing interpretations by respondents is recognised. As such, this report does not draw any conclusions for any individual responses, but rather seeks to gauge the centre of gravity in the sample. By ranking the responses to all trends in order of significance (number of responses with high or medium significance, out of total responses excluding don t knows ), the report identifies trends that stand out, both in terms of particularly high or low scores. This process has revealed a number of striking correlations between trends. This report therefore organises the high and low scoring trends into a number of thematically linked sections. For each section, the key constituent trends are listed alongside the analysis, along with their order of ranking and significance score. 08 Offshore Futures Report: Preparing for global sourcing

9 Theme one: Expanding scope Offshoring already has a huge range of applications. It covers outsourced and in-house activities; it includes a diverse and growing range of functions, from IT, to business process outsourcing (BPO) and call centre work. As a concept, offshoring already appears to be bursting at the seams. Yet the survey indicates that it is likely to continue to extend into new areas. Firstly, the result of the growth in the middle market trend predicts that small and mediumsized firms will start to tap into offshoring in greater numbers. Offshoring over the past decade has been driven by blue-chip multinationals, often with a pre-existing global footprint. Growth in middle-market offshoring means that many more local organisations will for the first time make use of global sourcing in their back offices. Secondly, the offshoring of activities from European locations will increase. 85% of respondents rated the Europe wakes up trend as a high or medium trend. To date, European offshoring particularly away from the more Anglophone firms in locations in Scandinavia, Benelux and Switzerland has been slow to take off, and, according to the Everest Research Institute, the UK market still accounts for the majority of European offshoring. HIGH SCORE TREND Growth of the middle market Ranked 8th out of 43 trends 85% rated as high or medium significance Medium sized firms become an increasingly important part of the demand for offshore services. Smaller than the initial large corporate pioneers of offshoring, the middle market has growing understanding of and appetite for offshoring. Suppliers are increasingly geared up to take on medium sized clients. HIGH SCORE TREND Europe wakes up Ranked 9th out of 43 trends 85% rated as high or medium significance Demand for offshoring in continental Europe rapidly accelerates, not just in more established offshore markets (eg, Scandinavia/Benelux) but also in France, Germany and Spain. The UK no longer accounts for the greater part of the European offshoring market. The movement to offshoring in Europe, notably Germany and Scandinavia will be the largest growth engine in the medium term. Stephen Dooley, Lawyer, Stephenson Harwood Offshore Futures Report: Preparing for global sourcing 09

10 Theme one: Extending scope Thirdly, most respondents believe that offshoring will continue to extend into new types of business activity. This is underlined by the from scribe to poet trend in which the scope of offshoring extends beyond a focus on transactional activities, into more judgemental and knowledge-intensive tasks. The most obvious illustration is the rise of knowledge process outsourcing (KPO), although there are other examples, including processes within well established offshoring areas such as ITO and BPO, that had previously been considered too sophisticated to offshore. However, a number of respondents set a limit on this trend. Arpit Kaushik, Managing Director, Crystals Design Limited, explains: not everything can be offshored successfully, and there are cerebral or relationship centric tasks that just cannot be offshored. HIGH SCORE TREND From Scribe to Poet Ranked 12th out of 43 trends 81% rated as high or medium significance There is an accelerating trend in offshoring to higher value work, include complex analytical and judgemental roles. As a result, the image of offshoring being 'just transactional' starts to fade. Transactional but also judgemental. Offshore providers shift from scribe to poet. Areas of growth in knowledge-intensive offshoring demand are KPO (Knowledge Process Outsourcing, such as equity analysis or market research); LPO (Legal Process Outsourcing) or PDO (Product Development Outsourcing). * Leapfrogging or piggybacking, 08 November 2007, The Economist. Taken together, the popularity of these three trends indicates that in the coming years, organisations will be tapping into global labour in a growing number of ways, and offshoring will apply to an ever widening range of activities. The breadth and depth of work undertaken offshore will continue to increase over the next five years. Kirsten Whitfield, Solicitor, Wragge & Co Takeaway The potential reach of offshoring should not be narrowly defined. It is multifaceted, complex, and evolving up the value-chain. Rather than pigeonhole offshoring, organisations need to be alert to emerging opportunities for global sourcing, in terms of new markets and new scope. Businesses need to invest in tracking the implications and opportunities offshoring for their organisation. As has been the case to date, successful organisations are quick to extend the benefits of harnessing the new applications of offshoring in new ways as they arise. 10 Offshore Futures Report: Preparing for global sourcing

11 Theme two: Supplier consolidation The survey pointed towards the consolidation of the global sourcing marketplace into fewer, larger suppliers ( survival of the biggest ). Nearly 90% of respondents viewed this as an important trend, setting out a future in which larger, full service providers are able to acquire or overcome competition from smaller, specialist suppliers. This fits with perceptions of a growing trend for larger suppliers to develop much more specialist offerings, by industry sector and subsector. This would also fit with a growing number of ITO and BPO supplier mergers in recent months, including HP/EDS and HCL/Liberata Financial Services. The larger or broader the supplier, the greater the ability to deliver a consistent service at a competitive price. Declan Kavanagh, Managing Director, Insight Test Services I suspect the trend will be to the big providers becoming managers of an array of secondary outsourcing arrangements. Stephen Dooley, Lawyer, Stephenson Harwood HIGH SCORE TREND Survival of the biggest Ranked 6th = out of 43 trends 87% rated as high or medium significance Consolidation in the sector accelerates. The larger suppliers acquire smaller specialists, smaller suppliers look to merge, or end up failing. Most successful offshore providers provide a comprehensive range of services, across multiple sectors and domains. LOW SCORE TREND New kids on the block Ranked 34th = out of 43 trends 60% rated as high or medium significance There is an ever growing fringe of new players entering the offshore market. In particular they emerge where new industries or processes are offshored for the first time, for example where new technology or deregulation disrupts the established order. The consolidation trend is further underlined by the low score for the new kids on the block trend. Comparatively few respondents believe that there will be an emerging group of new suppliers coming into the offshore market, despite the fact that the scope of offshoring is continuing to expand and create new specialisms. The offshoring marketplace has changed beyond recognition in the past few years. The Indian majors have developed into reputable global players that can compete with the best of the rest. Many of those organisations that were formerly seen as cheap and cheerful are now leading a new charge towards the global sourcing of high-quality services. Mark Kobayashi-Hillary Offshoring Director, National Outsourcing Association, and author of Who Moved My Job? Takeaway The offshore market will see growing consolidation in the coming years which is counter-balancing the growth in new entrants. Organisations should prepare to be working with fewer, larger offshore providers. End users of offshoring will need to ensure that consolidation does not create new conflicts of interest within their portfolio of outsourcing suppliers. Offshore Futures Report: Preparing for global sourcing 11

12 Theme three: New pricing models Typically, in a standardising, consolidating industry, pricing falls as competition intensifies and efficiency increases. However, the survey s commoditisation trend was not amongst the highest scoring trends, although 75% of respondents marked this as of high or medium significance (this dropped to 42% excluding suppliers). This result is potentially at odds with the observation that in some sectors of the market, margins are falling due to increased competition, higher costs, and falling prices, and may be partly due to the fact that newer forms of offshoring are emerging where commoditisation is not yet in play. Whilst offshoring and outsourcing as a whole is commoditising, there is equally a significant growth of high-value non-specialist work. This may be a relatively small percentage of the market but it will be significant. David Barrett, Founder & Chief Executive, PROCURiTAS Suppliers will start to present new higher value propositions to the market, while transactional services will begin to migrate to new lower cost locations. We can t ignore the trend. Declan Kavanagh, Managing Director, Insight Test Services Although the survey does not emphatically predict a future of price reduction and commoditisation, it does point to the belief that offshoring providers will increasingly look for opportunities to create value in new ways. Specifically, the contracting for value trends was highly scored, ranked 10th overall, compared with 39th for contracting for bodies. This comparison suggests a shift from the current dominant pricing approach, in which offshoring work is priced in terms of boxes and bodies effort, and headcount and cost saving, to one in which suppliers are rewarded for delivering specific outcomes for their clients, such as improving efficiency, quality, or transforming the business in the case of finance BPO, reducing backlogs in unpaid receivables. MEDIUM SCORE TREND Commoditisation Ranked 18th = out of 43 trends 75% rated as high or medium significance The vast bulk of offshoring becomes increasingly commoditised, with heated competition and erosion of prices. Many areas of offshore activities become low margin, profitable only for the largest players. HIGH SCORE TREND Contracting for value Ranked 10th = out of 43 trends 84% rated as high or medium significance Old pricing mechanisms around FTE pricing are gradually replaced with pricing by transaction or by value. The mindset is less about labour arbitrage, and more on focusing on specific business outcomes. LOW SCORE TREND Contracting for bodies Ranked 39th = out of 43 trends 47% rated as high or medium significance Offshoring contracts continue to focus on pricing primarily around counting hours, effort, resources and equipment. Much discussed visions of sophisticated pricing, involving value and transactional volumes, do not become more prevalent. I'm currently seeing a drive from my vendors to actively move to transaction pricing. This enables them to have more control on costs and increase/maintain their margin. Head of offshore supplier management, retail bank 12 Offshore Futures Report: Preparing for global sourcing

13 Theme three: New pricing models Offshoring and innovation? The sample stopped short of strongly endorsing a number of the more innovative future scenarios. At present, real innovation in business processes does not appear to be a priority for most offshoring users or suppliers. For example, the Offshore innovators trend, in which suppliers are increasingly seen as innovation partners providing new propositions to clients to transform their business, was voted only 30th in terms of significance. Similarly benchmarking, automation and demand aggregation (the emergence of a new breed of 'offshoring brokers' to aggregate demand across multiple, smaller clients) were not amongst the higher scoring trends. In most cases, offshore suppliers will not really drive innovation for organisations. Rather, they will continue to focus on service delivery. Takeaway End users of offshore outsourcing will take advantage of new pricing models, as suppliers and sourcing markets become more sophisticated. In particular, organisations may be invited to link offshore pricing to business outcomes, such as improved time to market, or reduced debtor days. Offshore end-users should not automatically expect price reduction or commoditisation, especially in newer areas of offshoring. Except in the most mature sectors of IT and BPO, benchmarking will remain a difficult tool to apply in most areas of global sourcing. Offshore Futures Report: Preparing for global sourcing 13

14 Theme four: Componentisation and standardisation The survey indicated that offshoring would link into two parallel technology trends. Firstly, the trend towards componentisation and service oriented architecture (SOA) scored very highly, with 91% of respondents viewing this trend of high or medium significance. In this trend, offshoring is accelerated by the growing tendency of organisations to industrialise their business processes and systems, defining them into discrete modular chunks that suppliers can provide on-demand. SOA enables a migration from the tightly integrated, tightly coupled technical architectures of the legacy world into new architectures that enable loosely coupled systems making it easier to slice up work between multiple locations and providers, accelerating the dynamic of standardised back-office software, and workflow applications. Industrialisation of process or product makes location of delivery less relevant. Declan Kavanagh, Managing Director, Insight Test Services Secondly, standardisation of software, and the spread of the concept of Software as a Service (SaaS), scored well, with 81% of respondents viewing it of high or medium significance. This trend sees the emergence of standardised technology platforms (for example, an industry standard finance or HR process workflow), rather than the highly customised software that dominates most business process outsourcing today. This standardisation enables highly commoditised and automated production economics, (already pioneered in the consumer IT sector by the likes of Google and Amazon) and sharply reduced operational costs. It also allows organisations to shift their models of software usage towards web-based access of competitively supplied on-demand services (paid for on use and as used), rather than having the responsibility of (expensive) full ownership of software suites. HIGH SCORE TREND Componentisation of services/service Orientated Architecture Ranked 3rd out of 43 trends 91% rated as high or medium significance Technology is increasingly influenced by SOA with an emphasis on modular, on-demand systems. In addition the service supply chain is increasingly industrialised, borrowing from the techniques of manufacturing supply chain thinking. HIGH SCORE TREND Software standardisation/saas Ranked 13th = out of 43 trends 81% rated as high or medium significance Service providers and software vendors collaborate on the development of standardised software (eg, ERP applications for a specific industry sector), which become de facto standardised platforms for IT or BPO delivery. Customers increasingly purchase standard payroll, finance or IT systems, rather than developing customised bespoke systems and services. This is accelerated by the growth of SaaS (Software as a Service) ie the use of web-based applications in which supplier takes on the responsibilities of ownership. 14 Offshore Futures Report: Preparing for global sourcing

15 Theme four: Componentisation and standardisation An example of the SaaS business model being delivered globally is Salesforce.com, which provides on-line on-demand internet-based services for Customer Relationship Management (CRM) from an operational base in the USA use. In this business model, the USA is as much offshore to Europe as is India and the economics of the automated SaaS production model is determined by factors other than relative professional white-collar labour economics such as energy and environmental costs and the quality of broadband access. In short, these trends envisage a future in which (loosely coupled) processes and systems are easier to configure, reconfigure and source, including around new geographic locations and offshore providers. By making it easier to reconfigure systems and processes, and to directly source them as services, these two trends remove some of the complexity that can act as a barrier to offshoring for many companies. Takeaway Organisations will structure their processes, and configure their systems, in a more loosely-coupled fashion. This will reinforce the move towards global sourcing, and the shift to offshore delivery, both in-house and outsourced. Organisations need to view process and system design as an opportunity to make their activities more flexible, and more able to tap into different global sourcing opportunities. Offshore Futures Report: Preparing for global sourcing 15

16 Theme five: Multi-location sourcing The geography of offshoring has been one of the key areas of debate to date, both in the media, and for organisations looking to identify the right location for their global operations. The survey highlighted a number of developments that we can expect to see in the future. For many years India has been the pre-eminent offshore destination; for example, according to the Everest Research Institute, in 2007 India had a 37% share of the BPO market, making it the leading destination in terms of market share as well as breadth and depth of work. However, respondents appear to see this dominance becoming increasingly qualified in the years ahead. 73% of respondents thought that the India slows trend would be significant (as opposed to 58% for India grows ), underlining that other offshore locations will continue to emerge and provide strong competition to Indian offshore leadership. The emergence of China was voted the 15th most significant trend, suggesting that despite evident shortcomings at present in terms of language and management skills, respondents do see the day when China will be an important offshore destination for UK and global business. It was also notable that the concept of Chindia - the vision of China and India developing as mutually reinforcing offshore destinations - was voted the 3rd least significant trend in our sample (only 45% saw this as of high or medium significance). In the view of our sample, the leading offshore locations are in a competitive - rather than complementary - situation. Consumers will still care about location of call centre staff, but will not know or care about other services. Gareth Williams, Technical Director, EQUISYS MEDIUM SCORE TREND India slows Ranked 21st out of 43 trends 73.3% rated it as high or medium significance. India continues to be the centre of gravity of the offshoring industry, but its relative share of the market falls from 2008 levels. Competition is offered by other offshore destinations, including established locations (eg Philippines) and a wide range newer alternatives (such as Egypt, Brazil, South Africa, Russia). MEDIUM SCORE TREND India grows Ranked 36th out of 43 trends 58% rated it as high or medium significance. India's position as the centre of the offshoring industry accelerates, with the clustering of expertise, talent and assets in its leading cities, the development of a range of tier 2 and 3 cities, and improvements in terms of regulation and infrastructure. India's share of the offshoring market increases above 2008 levels. MEDIUM SCORE TREND The emergence of China Ranked 15th out of 43 trends 78% rated it as high or medium significance. China will emerge as a viable low-cost, high-scale sourcing alternative to India. Limitations around management and language skills start to lessen, and an increasing amount of offshore work will move to China, often at the expense of Indian alternatives. LOW SCORE TREND Chindia Ranked 41st out of 43 trends 45% rated it as high or medium significance. Chindia - The Chinese and Indian sourcing markets develop a mutual interdependence, rather than in competition. Collaboration between the locations and local companies (eg training exchanges; infrastructure investments) becomes more important than direct competition. 16 Offshore Futures Report: Preparing for global sourcing

17 Theme five: Multi-location sourcing All of these notions are brought together by the trend from offshoring to global sourcing, ranked 4th = in the survey. The original idea of offshoring has been dominated by the concept of a simple A-to-B, transactional transfer of work. Nearly 90% of our respondents indicated that this idea will become increasingly displaced by the new mindset and terminology of the global delivery model - a multi-faceted, multi-location issue involving onshore, nearshore and farshore components. Eventually the word offshoring itself will become superceded by global sourcing, which more fully captures the complexities of the emerging patterns of the industry. We move from the concept of offshoring to the concept of 'competitive shores' - and the UK is already a very competitive shore. A diversity of factors influence the competitiveness of any one shore, so a richer pattern of international commerce in offshore operations emerges. Richard Sykes, Sole Partner, 'Dr Richard Sykes However, the strongest message from the sample is that global sourcing is not just about farshore destinations in the lowest cost locations. Europe s nearshore advantage, setting out the linguistic and geographical benefits of east European locations, was voted the 11th most significant trend. This acts as a reminder that a great deal of offshoring today is to nearshore locations such as Warsaw, Budapest and Bucharest, and the sample suggests that this is set to continue. This underpinned the view from respondents that whilst labour costs remain the primary question in location assessment, other factors such as relative skills, linguistic and cultural fit, and energy costs will also be important. Most surprisingly of all for a survey on offshore trends was the support for the trend in onshore excellence that the UK will continue to be competitive in many activities that could theoretically be offshored to cheaper locations. This trend was voted 4th in the survey, with 89% of respondents marking it as of high or medium significance. Even in an era of accelerating globalisation, there is a great deal of confidence in the UK s skill base and ability to compete in the global economy. HIGH SCORE trend From offshoring to global sourcing Ranked 4th = out of 43 trends 89% rated as high or medium significance From offshoring to global sourcing - all types of organisations become used to back office work being sourced from multiple locations. There is a gradual shift in thinking, from the offshoring of work (the point-to-point transfer of work to a single shore location), towards a global delivery model (sourcing across a range of locations). HIGH SCORE TREND Europe s nearshore advantage Ranked 11th out of 43 trends 84% rated as high or medium significance Locations in Eastern Europe will thrive, particularly in BPO and shared services. This will be driven by the scarcity of European language skills outside of Europe, and the perceived benefits of geographical and cultural proximity. HIGH SCORE TREND Onshore excellence Ranked 4th = out of 43 trends 89% rated as high or medium significance Companies still use onshore locations for a wide range of functions that are, in theory, globally mobile. The continuing importance of onshore service delivery is a reflection that there are deep pools of expertise close to home, that remain competitive in the global marketplace. These onshore pools of expertise may be industry specific, or function specific. Offshore Futures Report: Preparing for global sourcing 17

18 Theme five: Multi-location sourcing But the survey does not suggest this will amount to a reversal in work already offshored; the bringing it back home trend was the 2nd lowest score. Neither does the survey indicate that the practice of onshore offshoring - deploying offshore resources to onshore locations (especially via temporary visa regulations) - will stand out as a trend in the future; the Offshore over here trend was voted 4th from bottom. Whilst not being one of the highest scoring trends, many respondents perceived Location delegation as a significant trend. In this view, location will become an increasingly operational issue, to be safely delegated to an outsourcer. Rather than being agonised over by the executive team, organisations will focus on buying and managing the service, with location selection effectively at the discretion of the supplier. MEDIUM SCORE TREND Location delegation MID SCORE - Ranked 19th out of 43 trends 75% rated as high or medium significance LOW SCORE TREND Bringing it back home Ranked 42nd out of 43 trends 43% rated it as high or medium significance. Bringing it back home - Many organisations decide to bring offshore activities back onshore, after issues with service delivery, control or external perceptions. This insourcing is a reversal of the trend to offshoring, and is more pronounced in a few industry sectors. LOW SCORE TREND Offshore, over here Ranked 40th out of 43 trends 46% rated it as high or medium significance. Instead of distributing work to offshore locations, increasingly offshore resources are deployed to onshore locations (typically via temporary visa regulations). The question of offshore location becomes an increasingly operational, rather than strategic question. In most cases, the end user is comfortable delegating location decisions to the supplier, who may select the appropriate destination in their global network, provided that service targets are met. Only in the set up of in-house shared service centres is location still a strategic question. Takeaway Offshoring is not and will not be limited to India. Organisations need to understand that a healthy offshore strategy will have to take into account the opportunities from a range of sourcing destinations, including China, Europe, and the UK. The UK will remain one of the most competitive locations in the world, even for activities that are can be sourced globally. For many organisations using outsourcing to tap into offshore markets, the service provider will take the lead in recommending the right offshore location. However, all successful companies will recognise that the location question remains a major source of determining value and risk, which therefore requires a clear and informed strategy. Tapping into worldwide labour effectively should no longer be seen as a one-off transactional lift and drop of work to a single location. Success requires the ongoing management of an organisation s requirements in a diverse and evolving global market for skills. The shift from the term offshoring to global sourcing and global delivery model will reflect this. 18 Offshore Futures Report: Preparing for global sourcing

19 Theme six: The need for expertise The breadth and complexity of sourcing will demand new discipline, rigour and expertise. The survey indicates that the single biggest challenge will be how organisations co-ordinate and manage the multiplicity of in-house and outsourced offshoring they have undertaken. Juggling complexity (see box) was rated as the single most important trend out of all those listed in the survey. To get on top of this challenge, widespread ad hoc approaches to planning and managing offshoring will become inadequate. Excellence in supplier management, contract management, governance, service management and shared service optimisation will be vital. Questions of currency fluctuation, inflation and geopolitical risk will also loom larger as organisations offshoring portfolios continue to grow. In addition, offshoring operations will be expected to be world class in terms of compliance - with whatever regulations and standards governments and end users set out (see Compliance core competence trend). Early Indian IT offshoring evidenced its capability through accreditation to ISO standards and the Capability Maturity Model. In more recent years, the uptake of more sophisticated IT offshoring and business process outsourcing has been enabled by suppliers demonstrating that robust and manageable systems can be put in place to ensure adherence to standards, such as EU data protection requirements, Sarbanes Oxley or international accounting standards. UK and global businesses are likely to face continued changes and challenges in their regulatory and quality regimes, and offshoring activities will need to keep pace with this. HIGH SCORE TREND Juggling complexity Ranked 1st out of 43 trends 95% rated as high or medium significance The main challenge of offshoring becomes how best to manage multiple offshore facilities and service providers in a range of locations. New techniques in multisourcing become essential in making offshoring run smoothly. HIGH SCORE TREND Compliance core competence Ranked 14 out of 43 trends 81% rated as high or medium significance Increasingly, offshore operations (outsourced and captive) are world class in terms of service compliance, data protection and security, utilising advanced processes and technologies such as iris scanning. Offshore Futures Report: Preparing for global sourcing 19

20 Theme six: The need for expertise The survey set out two complementary routes to address these new demands for offshoring expertise in-house, and external advisors (see Growth of in-house sourcing expertise and Rise of the advisor ). This first type of expertise is partly a function of the accumulation of insights and knowledge firms that do more offshoring have the opportunity to learn lessons, and get better at doing it. In time this will lead to the emergence of specialised executive roles for offshoring and global sourcing, rather than having these responsibilities covered implicitly by the IT or procurement teams. The survey also suggests these roles will have a higher profile within organisations: Off the chief exec radar was the lowest scoring trend in the entire survey, implying business leaders want organisations to retain a close eye on offshoring strategy. LOW SCORE TREND Off the Chief Exec radar Ranked 43rd out of 43 trends 41% rated it as high or medium significance. Most areas of offshoring become so familiar or trusted that they cease to be the subject of C-level or senior executive deliberation. Offshoring decisions are devolved to specialised teams, but are seen as less and less strategic. HIGH SCORE TREND Rise of the advisor Ranked 7th out of 43 trends 86% rated as high or medium significance A range of specialist advisory firms emerge to fill the gap in skills and capacity that firms encounter in a major outsourcing undertaking. Companies increasingly turn to advisors to guide strategy, location and supplier selection, and offshoring optimisation, including benchmarking. HIGH SCORE TREND Growth of in-house sourcing expertise Ranked 2nd out of 43 trends 94% rated as high or medium significance Organisations using offshoring accumulate and actively develop increasing amounts of sourcing expertise. This is borne out by the emergence of specialised teams and departments, such as 'Global Sourcing Offices', and new corporate roles such as the Chief Sourcing Officers. Global sourcing is no longer seen as a simple, transactional task to be handled by other corporate functions such as procurement or IT. 20 Offshore Futures Report: Preparing for global sourcing

21 Theme six: The need for expertise At the same time, businesses may either lack the in-house skills or capacity to address all their offshoring needs. They may also face unfamiliar offshore challenges, such as selecting a location in a new country, benchmarking market prices, or making offshore work with a new business model. In these situations external advisors are well placed to bridge the knowledge gap. As to whether captive or outsourced models offer the better route to the management of offshore work, the survey response is finely balanced. A slight shift to the outsourced model over the captive model is implied by the End of the captive and the offshore captive survives trends (ranked 22nd and 33rd respectively), although the results strongly suggest that both models have an important part to play in the foreseeable future. Captive offshoring will continue to be a significant trend due to the control it provides organisations over processes, quality, resources and costs. However, it will be one element in a global sourcing strategy. Gopalan Rajagopalan, Head of Outsourcing Practice, Sopra Group MEDIUM SCORE TREND End of the captive Ranked 22nd out of 43 trends 72% rated it as high or medium significance. In most areas of offshoring, particularly more mature sectors such as customer contact and IT development, there is an accelerating trend of migration from captive (in-house) to outsourced operations. MEDIUM SCORE TREND The offshore captive survives Ranked 33rd out of 43 trends 60% rated it as high or medium significance. The in-house control and operation of offshore centres retains a strong hold on sourcing strategy. In many sectors, particularly those that are highly regulated, captive operations are the dominant model of offshoring. In the virtual world of outsourcing and offshoring there are no hubs and the expertise in the UK can be relocated or delivered anywhere. David Fryer, CEO, BigHand Takeaway Organisations should not assume they will automatically have the right capabilities to plan, deliver and manage offshore activities. Businesses should understand and nurture their offshoring skills, as part of a broader sourcing capability. Many users of offshoring will need to set up expert internal teams to plan, track and improve their offshoring operations. Organisations should understand the growing market for sourcing advice. As offshoring becomes a more mature sector, specialist advisors are emerging to provide sourcing guidance. Many operators of captive offshore centres may find that they face increasing competition for their talent, and that outsourcing providers may now provide the quality and maturity they had previously found lacking. Offshore Futures Report: Preparing for global sourcing 21

22 Theme seven: The end of the backlash - for most Media coverage of offshoring over the past decade has been dominated by the political dimension - the degree to which the sourcing of jobs from offshore locations is damaging or beneficial to the economy, employment and competitiveness. In recent years, major offshoring announcements have often been greeted by hostile newspaper headlines and, in some cases, labour relation issues. All those debates - whether offshoring is good or bad, beneficial or not - are almost naive and immature now. Offshore is proven and here to stay. Arpit Kaushik, Managing Director, Crystals Design Backlash over outsourcing, on the grounds of national economic disadvantage or green issues, requires a level of government intervention or regulation that is impossible to imagine... the toothpaste is out of the tube. David Fryer, CEO, BigHand The survey uncovered a complex response on this question. On the one hand, 79% of respondents viewed the Continued controversy trend as significant, in which offshoring is predicted to remain politically charged in a number of sensitive areas, such as R&D and the public sector. Responses to trends focused specifically on the regarding the public sector bore this out. The concept that The public sector joins the club - increased public sector use of offshore delivery - was one of the lowest scoring trends, with only 48% of respondents seeing this of medium or high significance. This, combined with the average score for the public sector stays away trend, pointed to a lukewarm at best appraisal of prospects for increased offshoring in the public sector. MEDIUM SCORE TREND Continued controversy Ranked 16th = out of 43 trends 79% rated as high or medium significance In a number of sectors, offshoring will continue to be highly controversial, such as the public sector, or R&D intensive industries such as pharmaceuticals. Periodically, headlines appear that question the quality or security of offshore sourcing. LOW SCORE TREND The public sector joins the club Ranked 37th = out of 43 trends 48% rated as high or medium significance The public sector increasingly uses offshore delivery, and many elements of public sector back office work become seen as offshoreable, except where national security is seen as an issue. The amount of work offshored by the public sector (eg share of IT spend) starts to catch up with the private. MEDIUM SCORE TREND Public sector stays away Ranked 32nd out of 43 trends 63% rated it as high or medium significance. Despite a few examples of major public sector offshoring projects, for the most part national security and local concerns mean that the public sector does not widely embrace offshore services. 22 Offshore Futures Report: Preparing for global sourcing

23 Theme seven: The end of the backlash - for most Responses to trends focused specifically on the public sector bore this out. The concept that The public sector joins the club - increased public sector use of offshore delivery - was one of the lowest scoring trends, with only 48% of respondents seeing this of medium or high significance. This, combined with the average score for the public sector stays away trend, pointed to a lukewarm at best appraisal of prospects for increased offshoring in the public sector. Despite some indications and success stories from the market (such as Steria s Shared Business Services joint venture with Department of Health for provision of Finance and Accounting services to the NHS), our survey indicated that public sector offshoring would not be significant in the coming years, and this appears to be particularly likely for more visible services involving direct contact such as call centre work, as opposed to back office processes such as applications development. This is at a time when outsourcing is, and will continue to be, a major provider of public services: BERR s Public Service Industry Review found that either private or community providers accounted for one-third of public services (worth an estimated 78 billion). Public sector offshoring will be held back by politics. Head of offshore supplier management, retail bank The UK Public Sector will stay away from offshoring due to the sensitive nature of much of the information, coupled with a view, from the British public, that sending personal information abroad is not likely to an acceptable activity for a UK public body. Dave Martin, Managing Security Consultant, Logica This point of view, in which offshoring is increasingly accepted as business as usual, is supported by the low score for the Recession all bets are off trend, which was ranked 38th out of 43 trends. The survey clearly indicated that even in the event of a sustained economic downturn (which at the time of writing seems unavoidable), there is not expected to be a significant increase in opposition to offshoring. Indeed many commentators are predicting that the credit crunch will accelerate the growth in offshoring. MEDIUM SCORE TREND What backlash Ranked 17th = out of 43 trends 77% rated as high or medium significance Offshoring is seen as a standard business practice, rather than something new or political charged. Consumers become indifferent to offshoring, or increasingly start to see offshoring as a something that can be in their interests. LOW SCORE TREND Recession All bets are off Ranked 38th = out of 43 trends 47% rated as high or medium significance In the event of a sustained economic downturn, there is a return to more strident opposition to offshoring, which is widely presented as a destructive force, damaging local workforces and eroding national competitiveness. But at the same time as continued political sensitivity towards offshoring in certain sectors, 77% of respondents felt that the What backlash trend was of high or medium significance, indicating that for most of the economy, offshoring is becoming an unremarkable business practice (or even a practice that consumers might see as being advantageous). Offshore Futures Report: Preparing for global sourcing 23

24 Theme seven: The end of the backlash - for most In the current financial climate, many businesses will turn to outsourcing, and offshoring in particular, to drive out operational efficiencies. In a buoyant market, many firms want to offshore; in a difficult market, many firms need to offshore. Tim Lloyd, Managing Partner, Alsbridge At present the jury is still out on how a recession might impact the offshoring market. However the emphasis of offshoring will start switching away from the strategic and global and back towards the low-cost. And suppliers know how to excel in offering value, even if they would prefer to be offering services for more strategic reasons than cost alone. Mark Kobayashi-Hillary Offshoring Director, National Outsourcing Association and author of Who Moved My Job? Nevertheless companies will naturally need to follow due and proper process in the deployment and management of their offshoring strategy (for example, in terms of consultation, communication and redeployment). But based on the results of the survey, a return to the highly charged headlines of recent years looks unlikely for non-sensitive sectors of the economy, even in a challenging fiscal climate. MEDIUM SCORE TREND Greensourcing Ranked 20th = out of 43 trends 74% rated as high or medium significance For the first time the environmental consequences of offshoring becomes a major issue (eg, impact of travel, service centre construction). Offshore providers and users alike start to measure and improve the green credentials of their offshoring activities, including carbon neutrality. Greensourcing The Greensourcing trend, which predicts that the environmental impact of offshoring will become an important factor for users and service providers alike, was voted the 20th most significant trend. Whilst this meant that 74% of respondents believed green issues would become more important to sourcing in the future, to some degree it was lower down the list of priorities than some recent coverage of the subject might suggest. At the very least, this result suggests that greensourcing, in the view of the sample, will have to compete with a large number of other issues to gain the attention of outsourcing and shared service executives. The policy dimension The question of policy was a dog that didn t bark. The survey did not uncover any clear sense that the policy framework in which offshoring is operating today needed major reform, nor that there was a great regulatory need that required attention. This implied a tacit approval of the Government s current broadly permissive stance towards offshoring, and global trade in general. Takeaway Many industries will find that any political opposition to offshoring with subside rapidly if it has not already done so. This will be based on offshoring s growing track record, and a due and proper focus on consultation, communication and change management. For a limited number of sectors, above all the public sector, offshoring may remain too sensitive an issue to consider. This will mean that a range of opportunities for efficiency in the public sector through offshoring will be delayed for years, or ruled out altogether, unless the political concerns of stakeholders can be addressed. As a result there will be a growing public debate about the role of offshoring in the public sector. A recession will not derail offshoring by reviving strident political opposition to global sourcing. Many respondents in fact expect an economic downturn to significantly increase demand for offshoring. 24 Offshore Futures Report: Preparing for global sourcing

25 Offshore Futures: a checklist of challenges Together the seven themes identified by the Offshore Futures Survey provide a planning checklist. The themes will be the biggest challenges to emerge in the next five years for UK and global organisations looking to develop and deploy global sourcing strategies. They set out the biggest offshoring developments identified by the survey, and as such they represent a set of challenges for organisations to consider as they develop and deploy their sourcing strategies over the coming years. Theme Takeaways 1. Expanding scope The potential reach of offshoring should not be narrowly defined. It is multifaceted, complex, and evolving up the value-chain. Rather than pigeonhole offshoring, organisations need to be alert to emerging opportunities for global sourcing, in terms of new markets and new scope. Businesses need to invest in measuring the benefits tracking the specific implications of offshoring and understand the effects of not offshoring for their organisation. As has been the case to date, successful organisations are quick to extend the benefits of harnessing the new applications of offshoring in new ways as they arise. 2. Supplier consolidation The offshore market will see growing consolidation in the coming years which is counter-balancing the growth in new entrants. Organisations should prepare to be working with fewer, larger offshore providers. End users of offshoring will need to ensure that consolidation does not create new conflicts of interest within their portfolio of outsourcing suppliers. 3. New pricing models End users of offshore outsourcing will have the opportunity to take advantage of new pricing models, as suppliers and sourcing markets become more sophisticated. In particular, organisations may be invited to link offshore pricing to business outcomes, such as improved time to market, or reduced debtor days. Offshore end users should not automatically expect price reduction or commodification, especially in newer areas of offshoring. Except in the most mature sectors of IT and BPO, benchmarking will remain a difficult tool to apply in most areas of global sourcing. 4. Componentisation and standardisation Organisations will structure their processes, and configure their systems, in a more loosely-coupled fashion. This will reinforce the move towards global sourcing, and the shift to offshore delivery, both in-house and outsourced. Organisations need to view process and system design as an opportunity to make their activities more flexible, and more able to tap into different global sourcing opportunities. Offshore Futures Report: Preparing for global sourcing 25

26 Offshore Futures: a checklist of challenges Theme 5. Multi-location sourcing Takeaways Offshoring is not and will not be limited to India. Organisations need to understand that a healthy offshore strategy will have to take into account the opportunities from a range of sourcing destinations, including China, Europe, and the UK. The UK will remain one of the most competitive locations in the world, even for activities that are can be sourced globally. For many organisations using outsourcing to tap into offshore markets, the service provider will take the lead in recommending the right offshore location. However, all successful companies will recognise that the location question remains a major source of determining value and risk, which therefore requires a clear and informed overarching strategy. Tapping into worldwide labour effectively should no longer be seen as a oneoff transactional lift and drop of work to a single location. Success requires the ongoing management of an organisation s requirements in a diverse and evolving global market for skills. The shift from the term offshoring to global sourcing and global delivery model will reflect this. 6. The need for expertise Organisations should not assume they will automatically have the right capabilities to plan, deliver and manage offshore activities. Businesses should understand and nurture their offshoring skills, as part of a broader sourcing capability. Many users of offshoring will need to set up expert internal teams to plan, track and improve their offshoring operations. Organisations should understand the growing market for sourcing advice. As offshoring becomes a more mature sector, specialist advisors are emerging to provide sourcing guidance. Many operators of captive offshore centres may find that they face increasing competition for their talent, and that outsourcing providers may now provide the quality and maturity they had previously found lacking. 7. End of the backlash for most Many industries will find that any political opposition to offshoring with subside rapidly if it has not already done so. This will be based on offshoring s growing track record, and a due and proper focus on consultation, communication and change management. For a limited number of sectors, above all the public sector, offshoring may remain too sensitive an issue a strategy to consider. This will mean that a range of opportunities for efficiency in the public sector through offshoring will be delayed for years, or ruled out altogether, unless the political concerns of stakeholders can be addressed. As a result there will be a growing public debate about the role of offshoring in the public sector. A recession will not derail offshoring by reviving strident political opposition to global sourcing. Many respondents in fact expect an economic downturn to significantly increase demand for offshoring. 26 Offshore Futures Report: Preparing for global sourcing

27 Offshoring is growing up Some people may have already reached the conclusion that offshoring is yesterday s news it is tried, tested and understood. But despite the wide range of opinions identified by this survey, a clear unifying message stands out to refute this perspective: offshoring is set to grow, mature and evolve. Trends such as consolidation, standardisation, and commoditisation are the classic signs of a maturing industry. An end to political debate about offshoring (for most sectors) further points to growing acceptance that global sourcing is an established part of the business landscape. Offshoring is no longer a brave new world for business. The supplier and buyer sides of the market are becoming increasingly sophisticated. New opportunities and tools for tapping into global sourcing are emerging. It is no longer possible to view offshoring as the wild west of the service economy; it is morphing into a widely used, trusted and integral part of business operations for many types of organisation. This does not mean that all types of offshoring are at the same stage in their evolution. Whilst the best established forms of offshoring (especially in ITO and BPO) are very well established, some areas, such as KPO or product development outsourcing, are still in their infancy, see figure 1. But although different types of offshoring have different starting points, they are all moving through the same process of evolution. The direction of travel is clear - offshoring is growing up. Offshore Maturity Mature eg ITO Apps Devt Source: Alsbridge plc Maturing eg Finance BPO Emerging eg KPO Product Development Outsourcing Remote Infrastructure Management Figure 1: Offshore maturity : waves of change This means that getting to grips with different types of offshoring requires working with very different tools and assumptions. For example, in looking to negotiate a KPO deal, organisations will struggle to find the pricing benchmarks, common terminology or market expertise that they take for granted in BPO or ITO. Similarly in any given industry, the level of sensitivity to offshoring may differ depending on how well proven the model is. For example in financial services, ITO offshoring has a higher penetration than finance BPO or KPO offshoring, but as predicted by the maturity model, this would be expected to change year on year. Offshore Futures Report: Preparing for global sourcing 27

28 Conclusion Global sourcing: time to focus In this era of evolving and maturing offshoring, there will be new types of offshoring to buy, new ways of working offshore, and new global risks and opportunities. Suppliers will become ever larger, more capable, and sophisticated. It will become possible to achieve more with offshore outsourcing and captive delivery centres, and increasingly difficult to ignore global sourcing altogether. It is time for organisations to acknowledge this evolution, and adopt a more disciplined, focused approach to global sourcing. For too often, offshoring is something that has happened incrementally, without rigour, consistency, or co-ordination. This new era of offshoring demands a new level of focus. Going forward offshoring should be something that successful organisations should seek to plan, manage and optimise. To do this they may appoint senior global sourcing roles, identify offshoring teams, work with external advisers, and set out long term sourcing strategies that co-ordinate their increasingly complex portfolio of offshore activities. In short the world s best run organisations will get serious about offshoring. They will recognise that although global sourcing has indeed become business as usual, the offshoring juggernaut has not yet reached its destination. 28 Offshore Futures Report: Preparing for global sourcing

29 Highs and mediums as % of total responses Highs and mediums as % of total responses Appendix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Top Scoring Scenarios 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Lowest Scoring Scenarios Offshore Futures Report: Preparing for global sourcing 29

30 Bibliography Czerniawska, F, and James, M. (2008) Next generation outsourcing Management Consultancies Association 'Embracing the Challenge, Exploiting the Opportunities: Building a World Class IT Profession in the Era of Global Sourcing' (2006) British Computer Society European CIO Survey - Views on future IT delivery (2006) Capgemini Everest Research Institute (2008) Information supplied to Intellect Foundations First: Building the future of the technology industry (2007) Intellect Greenaway, D, Görg, H, and Kneller, R. (2008) Offshoring and the UK economy The Leverhulme Centre for Research on Globalisation and Economic Policy, The University of Nottingham Hamm, S. (2006) Bangalore Tiger McGraw-Hill Julius, D. (2008). BERR Public Service Industry Review. Kobayashi-Hilary, M, and Sykes, R. (2007) 'Global Services: Moving to a level playing field' British Computer Society i2010 Working Group. (2007) 'Delivering i2010: Ensuring the Right Conditions for an Innovative, Inclusive and Competitive UK Knowledge Economy' Information Age Partnership NASSCOMM Indian IT-BPO Industry Factsheet. (2008). [online] Accessed 20 October 2008.Available from World Wide Web: 'The New Face of Offshoring' (2006) Economist Intelligence Unit 'Offshoring of business services and its impact on the UK economy' (2004) Aim Research Technology in India and China (2007) The Economist 30 Offshore Futures Report: Preparing for global sourcing

31 Intellect s Outsourcing and Offshore Group Intellect s Outsourcing and Offshore Group represents 365 members from the wider outsourcing and offshore vendor communities, including the suppliers of outsourced solutions and services, software companies offering offshore services to the UK market, consultants, advisers and intermediaries. The group works to improve members understanding of market developments, requirements and challenges. Promoting informed analysis and debate, the group draws on the breadth of experience across its membership and ultimately works to raise the professionalism and business effectiveness of all members. The group presents networking opportunities, education and market intelligence to companies interested in outsourcing, offshore and the global trade in services. Objectives The group s key objectives are to: identify changes within the marketplace and address new issues act as a leading body in the outsourcing and offshore industries, producing industry comment and obtaining recognition as an independent advisory group lobby the wider stakeholder community provide information and guidance to members recognise the challenges facing the multiple sectors it represents, and give focus to current challenges within specific sectors ensure members are key opinion formers in the outsourcing and offshore marketplace, working to publicise their position on key issues and produce written papers For more information about the group contact: Scarlett Graham Programme Executive T E scarlett.graham@intellectuk.org W Offshore Futures Report: Preparing for global sourcing 31

32 Intellect s mission is to use our expertise and knowledge to provide the highest quality of service and intelligence to our members in the ICT industry, helping them to make the right business decisions to deliver commercial solutions and achieve growth and profitability. We do this by fostering improved business performance, encouraging thought leadership, and making the shaping of markets and influencing of policy possible. We are constantly striving to provide work environments where our members can meet their potential and thrive in an atmosphere of excellence through working closely with the government, regulatory bodies, policy makers and businesses. For more information visit Intellect Russell Square House Russell Square London WC1B 5EE T F E info@intellectuk.org W Intellect October 2008