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Gartner: IT services firms must exploit flaws of offshoring

IT services firms in the U.S. and Western Europe need to hammer home the flaws of offshoring if they want to ride the wave and not be washed up.

IT services vendors in North America and Europe have some tweaking to do if they don't want to be washed up by their offshore rivals.

Gartner Inc. has predicted that offshore business process outsourcing (BPO) will become a $1.8 billion market in 2003 -- a nearly 40% increase over 2002's total -- with India getting the biggest piece of the pecuniary pie. Analysts with Stamford, Conn.-based research firm say that there are three things "onshore" IT services vendors need to do in order to compete: get out there and actually meet customers in the flesh more often, base competition on business value instead of price, and lay down some requirements for innovation and quality.

Onshore firms that do those three things will be exploiting and capitalizing on the flaws inherent in the offshore model, namely communication and the business skills it takes to show the business value of outsourcing.

"In order to compete effectively with offshore vendors, North American services companies need to re-evaluate their delivery methodologies to include larger components of a project that can be delivered off-site," said analyst Alex Soejarto in a statement.

Gartner said that the trend of offshore outsourcing is unlike trends past because it's becoming a mainstream practice much more quickly, and because it will still be going strong once the Western economies recover.

Because of the rapid reality, Gartner analysts think it's important that onshore IT services vendors get involved with other offshore service vendors in some fashion.

Michele Cantara, a principal analyst for Gartner, said that North American and Western European IT services vendors that have $1 million-plus deals going need to come up with partnership or acquisition ideas if they want to better compete with offshore service vendors.

If you can't beat 'em, join 'em. Or buy 'em.


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