Financial Crisis and IT Outsourcing – What’s Next?

Dialogue Magazine, the flagship publication of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), publishes an opinion piece by Alexei Miller, Executive Vice President at DataArt, on the future of IT outsourcing after the financial crisis.

“All indicators are that Wall Street troubles will trickle down to the wider economy, affecting IT services spending changes not only at investment banks and services, but in other industries,” writes Miller. “To be sure, the old selling point of outsourcing – cost-cutting – is as potent as ever. However, compared to the IT economic downturn of 2002, a few things are different this time around… First, the market for offshore labor is much more saturated… Secondly, there has been a sizeable wave of complaint about offshore services delivered from the dominant locations…Thirdly, the industry at large has been too slow to innovate and lead, and too attached to the moniker of ‘cheap labor’.”

“All these factors lead us to believe that the market for ‘commodity’ IT outsourcing services is likely to flatten… These difficult times will present an opening for those vendors who have not just preached innovation, but practiced it, those who have spent their time understanding clients’ business processes and strive to improve them… We recommend that clients look for smaller, specialized vendors who will be willing to provide good terms, but will not look desperate. In this new world, clients will find themselves working with several specialized vendors at the same time and will need to hone a new skill – managing and bringing together reams distributed not just across continents, but across competing firms.”

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