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"Vendors, clients need to carefully understand one another in outsourcing relationships"

Madanmohan Rao interviews Philip Hassey, IDC Senior Analyst for Asia/Pacific IS Outsourcing

Philip Hassey is the Senior Analyst at leading market research firm IDC for its Asia/Pacific Information Systems Outsourcing program. Based in the Sydney office, he provides advice and insight into industry trends, opportunities and competitive dynamics. Philip is regularly quoted by a range of media organizations including the Sydney Morning Herald, South China Morning Post, Computerworld, Call Center News, ZDNet and CIO. He was formerly Worldwide Research Manager for the Government Market Unit at Accenture, and graduated from the University of New South Wales with a degree in applied science and a major in applied economic geography.

Q: What trends do you see in the growth of outsourcing from the US in the coming years? How do Europe and the Asia-Pacific compare in this regard?

A:

This market is set to grow rapidly in the next few years. Europe will also be

strong, particularly from high cost countries such as the UK and Germany. Asia-

Pacific demand will be strong - however, growth rates will be tempered by the low

cost of wages and other related factors in many countries. The key strengths will be from Japan, Korea, Australia and Singapore.

Figure 1: IS Outsourcing Marketplace (source: IDC)

Q: How will the proliferation of Web services and wireless technologies affect the outsourcing equation?

A:

This will have a great impact on the environment. The emergence of the Utility

model and greater acceptance of the xSP marketplace will have a huge impact on

the provision of services as well as the competitive environment. Wireless -- even

if it is to reach its full impact -- will have less of an impact than Web-based service provision especially at the enterprise end of the equation.

Q: How do the various industry verticals compare in terms of IT outsourcing market size? And how is this distributed across the various IT components?

A:

The largest vertical is Financial Services; in general, this accounts for approximately 30% of the total marketplace. The next largest vertical marketplaces are Communications, Government and Manufacturing.

The two largest IT components are IS Outsourcing and Systems Integration. ASPs are actually a very thin slice of the market -- but along with Applications Management they are the fastest growing part of the marketplace. Other key sectors include Network and

Desktop Outsourcing, and Processing Services.

Q: What are the Top Three misconceptions you have come across in the way clients and vendors approach outsourcing?

A:

1. Measurement of benefits in just pure cost saving measurement.

2. Lack of understanding of the intimate relationships required for outsourcing.

3. Vendors failing to understand that every client is a unique business with its

own characteristics and needs.

Q: How do you assess India's potential in the outsourcing arena?

A:

India has a great opportunity in the outsourcing marketplace. It has shown

leadership in a number of key areas such as Applications Development and Call

Centres which it can leverage to other areas. It is also helped by having a

number of major vendors originating from India who have found significant

success offshore.

The key asset is simply the number, supply and price of potential employees and

graduates that India is able to call on. Another benefit is the location, in a separate time zone to Europe and the US.

Some of the obstacles are the lack of a countrywide infrastructure that is 110%

reliable. Also the ability in English that few low cost countries such as Philippines are

able to meet.

The main competitiors will not be able to compete with India across the range of

services that India has to offer -- however they may have other advantages such as

a more reliable infrastructure, and closer cultural ties to the US. For instance, India has closer ties to the UK and Australia, whereas the Philippines has closer cultural ties to the US.

Specifically some countries who will look to compete against India for services

in one or many areas include Malaysia, Philippines, China (PRC), Australia, New Zealand, Czech Republic, Ireland and Mexico. These countries may not necessarily compete against India across the spectrum but provide a varying range of services in specific areas

Q: What research and services does IDC offer on the outsourcing front?

A:

IDC has a broad range of expertise and skills in research in the Asia Pacific

and worldwide research marketplace around outsourcing. This includes research

programs, consulting, presentations and workshops. Across the world we have over

12 analysts involved into researching various aspects of this marketplace.

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The writer can be reached at madan@techsparks.com

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