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Top 5 Market Trends That Will Drive Company Sourcing Agendas in 2011

by ISG

by Harvey Gluckman, Partner & Managing Director, TPI

It’s that time of year again where we want to provide our perspective on the TPI Top 5 industry trends we’re seeing in the marketplace that should shape many companies’ sourcing agendas in 2011. Based on recent client inquiries for our services, I feel confident that we’ve weathered the 2010 global economic challenges that influenced many CIOs’ IT operational and capital investment decisions. 2011 should be an exciting year — may the source be with you!

1. Cloud Computing — Who’s Gonna' Step Up? The lack of standardization across Cloud commercialization will continue to prevent many larger companies from fully embracing Cloud technologies and promised solutions. After all the hype and promises around Cloud Computing this past year, CIOs in 2011 will need to separate the wheat from the chaff and assess Cloud decisions that are likely to be led by their business units. With the exception of a few Cloud point solutions, Service Providers will have to prove its business relevance or the Cloud theme will evaporate in a slow death. Until the service provider community steps up and resolves the following operational, financial and business risks, market adoption will be confined to small and mid-sized companies unconstrained by legacy platforms: 

Security risks, inadequate governance, inconsistent pricing, inadequate service  levels, alternate source options, network bandwidth (LAN to WAN), service maturity, compliance challenges, privacy issues, audits, consumer contract terms, scope of IP indemnification, integration costs, data portability and data ownership issues

2. Service Integration. The role of “air traffic controller” will become more important as companies increase their use of multi-sourcing delivery strategies within and across corporate support functions. As companies determine the best ways to integrate and manage services (and whether or how to depend on outside providers for some or all of this role), they should have more time and resources to redefine — and achieve — their innovation agendas.
3. Social Platforms Upends Customer Centricity. The social software market will continue responding to customers’ demands for flexible environments in which they can create, share and find relevant information. Service integration will be a strong focus for CIOs weaving mobile, tablet and social network platforms into existing “clicks, bricks, rings and knocks” platforms. Companies are likely to target up to 25 percent of their capital budgets to social networking, including significant investments in business intelligence and analytics to combine social networking with more traditional data sources.
4. Weak Dollar to Drive Rural Sourcing. More companies will turn to rural locations for nearshoring and onshoring opportunities. This move will not be driven by high U.S. unemployment rates, as you might expect, but by business requirements. The price differential between the U.S. dollar and foreign currencies in low-cost destinations will narrow, making state partnerships attractive for buyers looking to rationalize their IT and BPO operational portfolios.
5. Governance Increases In Focus. An increasing number of companies will take advantage of Governance-as-a-Service, relying on expert assistance to manage and maximize their outsourced relationships. Improvements in technology enablement will allow companies to manage their service provider relationships at the enterprise level. And finally, as ever-evolving Cloud solutions continue to be disruptive, companies will focus on re-tooling and re-skilling client governance organizations, helping to mitigate value leakage of their service provider relationships in 2011.

For more information, contact Harvey Gluckman, Partner and Managing Director, TPI.