Trends in Global IT Delivery and Management

Report
Trends in Global IT Delivery and Management
Sandra M. Notardonato
This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other
authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied,
distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.
© 2010 Gartner, Inc. and/or its affiliates. All rights reserved.
Key Topics:
• Market Drivers
• Competitive Landscape
• Success in Global Sourcing
• Future of IT Services
1
Globally Delivered Services Will Outpace
Growth of Worldwide IT Services Market
Worldwide
IT Services
Market
Globally Delivered
Services are
estimated to be 9%
of total IT services
market today
$946.6 B
$776.5 B
~$70bn
2009
~$120bn$150bn
Globally Delivered
Services*
2013
*Gartner estimate — not a Gartner forecast
By 2013, Globally
Delivered Services will
represent an estimated
13.0% to 16.5% of
the total IT services
market
Macro Forces, Issues and Considerations
Shaping Global Sourcing
Economic
Factors
• CFOs driving IT cost controls
• Cost-focused IT decision-making
Accelerates offshore services use
Geopolitical
Shifts
• Globalization, emerging economies
• War, terrorist threats, currency flux
Geopolitical risks must be considered
Government
Intervention
• Protectionism vs. globalization
• Pending industry legislation
Monitor changes and legislation
Provider
Viability
• Provider focus on global delivery
• Consolidation, hypercompetition
Buyer choices, but increased scrutiny
Buyer Priorities for Using External
Service Providers: Top Drivers
Ensure IT Availability/Uptime
('Keep the Lights on')
28%
Reduce the Operating
Costs of IT
39%
Enhance IT to Support
Business Operations
16%
Enable Business Strategy
Change or Transformation
16%
0
= US Buyer
Top Driver
5
10
15
20
25
Percentage of Respondents
Top Driver
N = 1073
Note: Respondents rank ordering of top three drivers
Survey: Q4 2009, Economic Impact on IT Services Buying
Second Driver Third Driver
30
35
What Changed in the Past Year? Offshore Use
Occurs More Often in 47% of US Organizations
Renegotiation Of Contracts With ESPs
Influence of CFO on IT Services Spending
Influence of Procurement Department on IT
Services Spending
Use of Offshore Services Delivery
47%
Use of Technology as a Service Offerings
Investment in IT Innovation
Development of Captive Centers
IT Spending Without Approval or Oversight
of CIO or IT Department
0
= US Buyer
Occurs More Often
20
40
60
Percentage of Respondents
Occurs With the Same Frequency
N = 1073
Survey: Q4 2009, Economic Impact on IT Services Buying
80
Occurs Less Often
100
Buyer Adoption: How Global Services
Delivery Has Evolved
Growth
Creation
I - Onsite
"Staff Aug"
Growth
Maturity
III - Global
Sourcing
II - Offshore
Global
Sourcing is
Mainstream
India
"Emerging
Megavendors"
IV - "Just"
Sourcing?
Fully Integrated
global process
optimization
Country &
"Value Chain"
Competition
CMM
Level 5
"Body
Shopping
"
1979
From “Offshore” to
“Nearshore and
Offshore”
Y2K
1998
2008
Time
2020?
Global IT Services: Market Share Leaders
in Fragmented Industry
• Low-cost onshore or global delivery
is a factor for all major commercial
provider's strategies
• Top 10 leaders account for 27.3%
of market
• Average annual growth rate (2009
vs 2008) of top 10 leaders = -2.3%
• Average annual growth rate (2009
vs 2008) of all other providers =
-4.7%
• 92 providers have more than $1
billion in total IT services revenue
IBM(-6.6%)
7%
HP(-10.4%)
5%
Fujitsu
(-0.4%)
3%
Accenture
(-11.8%)
3%
CSC
(-6.5%)
2%
Lockheed
Martin
(3.1%)
2%
Capgemini
(-8.7%)
2%
All Others
73%
Worldwide IT Services, 2009 Market
Share Leaders ($776.5B)
Source: Gartner IT Services Market Share Analysis,
2009 - (X%) indicates provider's annual growth:
NTT Data
(7.2%)
1%
NEC (4.5%)
1%
SAIC
(6.3%)
1%
Gartner's 30 Leading Locations for
Offshore Services (2010)
Americas:
Argentina
Brazil
Canada
Chile
Costa Rica
Mexico
Uruguay
Europe, the Middle
East and Africa:
Czech Republic
Egypt
Hungary
Ireland
Israel
Morocco
Poland
Romania
Russia
Slovakia
South Africa
Spain
Ukraine
Note: Reflects new Gartner Country analysis, October 2009
Asia/Pacific:
Australia
China
India
Indonesia
Malaysia
New Zealand
Philippines
Singapore
Thailand
Vietnam
Consider These Three Main Factors to
Optimize Country Diversification
Providers
Global Delivery Model
Marketing/
Brand
IT Industry
Skillsets
Labor
Pool
Education/IT
Alignment
IP Protection
Country
Legal System
Cultural Compatibility
Methodologies
Credible
Scale
Industry/Domain Expertise
Language Skills
Country
Success
Technology
Skills
Industry Associations
Costs
Infrastructure
Education System
Government
Support
Politics and Economy
Accelerating Trend: China – The Other Global
Delivery Center
•
•
China has emerged as one of the most frequently discussed offshore locations in
Asia/Pac for global delivery diversification
Government support in developing offshore IT services from China strong, through tax
incentives (7% tax rate), subsidies, guaranteeing benefits, capital injections
- Ministry of Commerce Thousand-Hundred-Ten plan supports growth of outsourcing providers
•
•
•
•
•
•
•
•
Quality of labor pool improving, with plans to train 1.2M new skilled IT workers from
2009 to 2013—areas of expertise in testing, coding, embedded software development,
application development, and basic data analysis
China’s English proficiency has been on the rise since 2004—today written English
considered acceptable, however still marginal in conversation for business needs
Infrastructure near global standards—big competitive edge versus India
Wage rates competitive, particularly at entry level; lower employee attrition
Communist government in China showing stability, focus on high levels of GDP,
financial systems improving—needs to improve transparency and reduce corruption
Foreign direct investment, trading alliances basis for improving cultural compatibility
Financial support from government for vendors that reach CMM certification
Progress on IP and data protection, but remains challenge due to lack of enforcement
10
Know Which Relationship/Delivery
Approach is Most Suitable
Staff Augmentation
Project Work
Systems
integrator
BOT
Joint Venture
Captive Center
On-Site
Onshore
Nearshore
Offshore
Outsourcing/
Strategic Sourcing
There are multiple options for buyers. Relationship choices must link directly to
the commercial arrangements (rate cards, SLAs, performance etc.)
Changes in the IT Services Competitive
Landscape May Impact Your Decisions
Hypercompetition
• Pick up in demand —
but we expect fits and
starts
• Cost-based decisions
• Many providers chasing
any opportunity
(revenue)
• Vendor fundamentals:
Profitability,
Restructuring,
Downsizing,
Rebalancing
• India-based providers
experience slowing
growth
• New players in services
Consolidation
• Traditional approaches
and organic growth may
be insufficient to keep
revenue on target
• Acquisitions: HP/EDS,
Tech Mahindra/Satyam,
Oracle/Sun, PWC and
Deloitte/BearingPoint,
Dell/Perot, Xerox/ACS
… and expect more
• European companies —
likely targets
• Providers in solid cash
positions will be favored
to advance via
strategic acquisitions
Innovation
• Systemic changes in
IT sector require
responses
• Growth rates for new
industrialized services
— SaaS, Cloud —
exceed the market
growth rates
• Leaders invest to
reposition and catch
early wave — timing
is critical
• Management discipline
and long-term view to
navigate an
extended recession
New Models Shaping the Future of IT
Services
Business Value-Add
Optimization
Business
Strategy
Consulting
Creation
Custom BPO~HR~
Logistics~F&A
Custom Solutions
IT Consulting ERP~SCM~CRM~BI
CRM Call Center
App. Develop.
& Integration
Transaction
Processing
Enterprise
App. Mgmt.
One-to-
SaaS
Cloud-Based
Business Process
Services
Cloud-Based
Application Shared
Services One-toDelivery
Many
Remote
Data Center
Managed Services
Outsourcing
Hosting/
Collocation
Infrastructure
Desktop Management
Utility
Storage
Network Services
on Demand
Help Desk Outsourcing
Management
Value
One
Vertical/ProcessSpecific Business
Process Utility
Horizontal Business
Process Utility
IT Efficiency
Network Utility
Access
Cloud-Based
Application
Infrastructure
Services
Cloud-Based
System
Infrastructure
Services
Summary: Marketplace Trends We See in
Global Services Sourcing Today
Supply Side
Demand Side
Multicountry options
Balanced portfolio of
country choices
Global provider landscape
Provider selection
complexity
Increasing range of services
Portfolio optimization
in a global model
Resource management
Global sourcing
competencies
Alternative Delivery
Models
Customization/labor-based
versus Automation
Trends in Global IT Delivery and Management
Sandra M. Notardonato
This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other
authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied,
distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.
© 2010 Gartner, Inc. and/or its affiliates. All rights reserved.

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