Study: Business Value Shifts will Drive Outsourcing
Newest Saugatuck research shows 2005-2010 growth will be driven by firms changing their business model; offshoring backlash is a minimal factor.
Westport, CT (PRWEB) May 19, 2005 -- Research released this week by Saugatuck
Technology Inc. indicates that growth in the outsourcing of IT and business
processes not only will continue through 2010, but will be driven increasingly
by firms making strategic shifts in their traditional business value and
operations.
“Tactical cost-cutting needs will always be an important
factor in outsourcing decisions, but the real driver for the next several years
will be a shift in how firms see themselves and their value chains,” according
to Bruce Guptill, leader of the study and managing director of research for
Saugatuck.
“Companies used to compete based on how much of the customer
value chain they could control,” explains Guptill. “But now, forward-looking
companies only want to own the pieces of the value chain where they have true
competitive advantage. Their focus is on ensuring that supporting operations and
processes are agile enough to quickly adapt to market changes – and outsourcing
is a prime means of accomplishing that.”
Saugatuck’s findings are based
on a year-long research program regarding outsourcing plans and perceptions,
including surveys of more than 200 IT, finance and business executives
worldwide. Research findings include the following:
- An increasing
acceptance of Business Transformation Outsourcing (BTO), involving a more
strategic relationship between service provider and client, will drive new
sources of business value beyond cutting costs. 43 percent of companies say that
the percentage of outsourcing spending categorized as BTO would increase from
2004 to 2005
- Twelve percent of outsourcing spending in 2005 will involve
offshore resources, growing to 19 percent in 2009. Less than one-third of
companies surveyed agreed that potential backlash against their company’s brand
is impacting their offshore outsourcing decisions. And less than one-third
agreed that consideration of the potential impact on their home country’s
economy is impacting their offshore outsourcing decision.
- New standardized
delivery models will reduce the upfront investment and short-term return on
outsourcing options. Companies expect the percentage of their outsourcing
spending that is for utility-type shared services to grow from 12 percent in
2005 to 22 percent in 2009 for IT outsourcing, and from 11 percent to 19 percent
for business process outsourcing.
- New pricing models will better link
outsourcing costs to business value obtained. The biggest changes in pricing
models will be in benefits-based and equity-based models.
The complete
research study, entitled “Outsourcing Transformed: New Models and Methods
2005-2010,” was published today by Saugatuck and is available on the company’s
web site (www.saugatech.com).
The implications of this research
for the already overcrowded outsourcing service provider market are huge,
according to study co-author Bill McNee, Saugatuck’s founder and CEO.
“Vendors will need to develop offerings and value propositions that
reflect the changing user perceptions of business value from outsourcing,”
explains McNee, adding, “Value propositions such as improved time-to-market,
improved levels of customer satisfaction, and access to new markets will be
facilitated by new delivery and pricing models for
outsourcing.”
Executive Research and Interviews
The study is a result
of a year-long Saugatuck research program, including a web survey of more than
200 senior IT, finance and business executives and 40 detailed interviews. The
research was conducted between October 2004 and March of 2005. More than
two-thirds of the firms participating in the research had revenues of at least
$1 Billion per year. Details regarding this research, and Saugatuck findings and
recommendations, can be found by visiting Saugatuck’s web site at www.saugatech.com, or by
calling 1.203.454.3900.
About Saugatuck Technology
Saugatuck
Technology Inc. provides research-based consulting services to senior
executives, information technology vendors, and investors, combining strategy
development, business planning, and market intelligence with first-hand research
of executive technology buyer trends. Founded in 1999, Saugatuck is
headquartered in Westport, CT.
Media Contact:
Chris MacGregor,
Saugatuck Technology
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Source : http://www.prweb.com/releases/2005/5/prweb241726.htm