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IT Outsourcing 3 Trends to Watch

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					by Laura Clapper, BusinessReviewUSA Cloud computing, 鈥榦 nshoring 鈥?and
Latin America 鈥攖 he developments that will change the way businesses outsource.
Companies turn to IT outsourcing as a way to reduce costs while tapping into
established knowledge and talent. As the global business climate changes, so does the
playing field for IT outsourcing. Technological developments such as Cloud
Computing make it easier for companies to outsource their infrastructure to cheaper
locales within and outside of their countries. Similarly, the dominance of India for IT
outsourcing is threatened by the emergence of Latin America as a cheaper alternative.
鈥淥 utsourcing allows organizations to shift investment to strategic initiatives and
focus on their core business rather than tactical functions and achieve higher
predictability, efficiency, scalability and agility in IT operations,鈥?said Surya Kant,
President, North America of Tata Consultancy Services. 鈥淚 t also allows the
enterprises to leverage R&D expenditure from large service providers and bring
innovative new IT and business-focused solutions without investing to build them.鈥?
IT is outsourced to countries where employees are able to communicate with business
managers and customers clearly and effectively. According to Leon Rizio, Senior
Consultant and Principal for CUSTOMatrix, competition with China for outsourcing
business drove India to establish the infrastructure necessary for IT contracts in
Bangalore and eventually the rest of country. Though the Chinese may have the
infrastructure for IT development in place, the language barrier is often a difficult
challenge to surmount. OUTSOURCING TRENDS Latin America has emerged as a
new destination for IT outsourcing. The economies of the countries of the region have
been growing steadily over the last decade and are poised to become business
powerhouses. 鈥淭 here are many companies from emerging markets that are
becoming multinationals,鈥?said Kant. 鈥淭 CS [part of the Tata Group] has been
leveraging presence in fourteen countries in Latin America and offshore centers in
Brazil, Uruguay, Mexico and Chile to serve these organizations in their local and
global needs. 鈥 ? Infrastructure is beginning to be geographically independent,
meaning that it does not have to be done onsite. This allows high speed data centers to
move to anywhere in the world without negatively impacting costs. 鈥淪 ome people
are moving their infrastructure to India, but I would say people are moving their
infrastructure to lower cost locations, mostly in the U.S.,鈥?said Tom Young, Partner
& Managing Director, CIO Services 鈥?Infrastructure, TPI. EMERGENCE OF
CLOUD COMPUTING Our experts agree that cloud computing will have an effect
on outsourcing. Cloud technology allows people to access applications from
anywhere within the cloud network. 鈥淐 loud computing will be a benefit to
outsourcing,鈥?said Rizio. Rizio surmises that cloud computing may replace or
reduce the need for an entire IT department and reduce the need to outsource
completely. 鈥淐 loud computing remains a focus in the industry, and we believe it
will become an increasingly viable option for enterprise IT and specifically to IT
service providers, primarily due to the infinite opportunities around innovative
business models, 鈥 ?said Kant. 鈥 淲 hile the technology foundations of cloud
computing can be considered as a gradual evolution, we believe that the business
models will prove to be potentially disruptive.鈥? According to Young, a hurdle that
businesses face in adopting cloud computing technology lies in their complex legacy
processes. Companies have established business processes that have been customized
to their business model. 鈥淐 loud computing is the antithesis of that, it 鈥檚 simple
and standard,鈥?said Young. While many companies aren 鈥檛 ready to adopt cloud
computing right now, they are testing the waters as they seek to simplify their
complex processes. Young feels that more companies will adopt cloud computing
within the next five years. 鈥淭 he way that companies do business has to change,
鈥?said Young, 鈥淭 hey have to redesign their internal processes.鈥? SECURITY
CONCERNS The United States is more diligent in prosecuting individuals or groups
accused of stealing trade secrets or pirating protected products. 鈥淐 ountries abroad
don 鈥檛 have the same concerns about piracy that we have in the States,鈥?said
Rizio. Once products or services have been outsourced overseas, there 鈥檚 a risk of
intellectual theft. Cloud computing carries a high risk for privacy and security
breaches, as the nature of the technology provides for the easy accessibility of
applications and information from anywhere. However, as cloud computing permeates
the way companies do business, security applications are sure to spring up to meet
consumer and business demand. TIPS FOR OUTSOURCING Companies who have
never outsourced before should seek the help of qualified experts. 鈥淭 he cost of
advice is less than the cost of a mistake,鈥?said Young. Once a company has
determined what to outsource, it is imperative to address the expected outcomes of the
move and establish benchmarks. 鈥淭 his will help minimize and reduce unwanted
costs and ensure greater customer savings, less time and effort wasted by the IT
service provider and a more successful business outcome 鈥?all factors leading to
higher quality of experience and greater certainty for customers,鈥?said Kant. Take
the time to research where to outsource. 鈥淓 ach country has advantages and
disadvantages. All countries are interested in outsourcing, but the challenge is: Do
they have the infrastructure? Do they have the procedures? Do they have the people?
鈥?says Rizio. The best place to 鈥榦 utsource 鈥?may be in one 鈥檚 own country.
To help ensure success, establish relationships and comprehensive policies to keep the
lines of communication open while securing productivity.
  [Source]           Software            Outsourcing            Blog          Section: ;