Offshore Outsourcing Evolving Into A More Global Network, Says Forrester

Business Wire, Sept 14, 2004

CAMBRIDGE, Mass. -- Six Major US- And Indian-Based IT Services Vendors Face Challenges Adopting A Low-Cost Global Delivery Model

Offshore outsourcing is evolving to a more sophisticated model according to Forrester Research, Inc. (Nasdaq: FORR). What used to be a simple one-hop from the US to India, for example, now includes work being done across a global network of multiple, offshore locations that delivers services at even lower cost. As a result, suppliers are shifting their focus from serving the needs of local clients, or supporting remote operations of multinational firms, to expanding their talent pools in developing areas like China and Southeast Asia. New research from Forrester further defines this new low-cost global delivery model (GDM) and finds that none of the IT services vendors is leading in its adoption.

To assess the large investments IT services vendors are making in a low-cost GDM, Forrester compared the capabilities of the three major onshore suppliers (Accenture, EDS, and IBM), and three offshore suppliers (Infosys, TCS, and Wipro). Using its Wave(TM) methodology, Forrester evaluated the suppliers against 60 criteria, reflecting a fully developed low-cost global delivery model, and found that while the six suppliers are making a broad range of GDM investments, no one is a clear leader yet.

"The grouped ranking of the vendors is an indication that the move to a low-cost GDM is at the beginning of an evolution which will take place over the next three to five years," said John C. McCarthy, vice president, at Forrester Research, Inc. "As providers expand into new locations, develop new capabilities and increase GDM services, they will face unique challenges."

Forrester sees the adoption of this distributed approach as a complex evolution with specific hurdles around account management, process, skill sets and culture.

Challenges For Indian Suppliers (Infosys, TCS, And Wipro)

--Improving account management

--Moving away from technology-centric messages that often alienate business buyers

--Investing in vertical-specific skills

--Building out their middle management

--Becoming more multicultural organizations

Hurdles For Onshore Suppliers (Accenture, EDS, And IBM)

--Motivating local sales people to sell their GDM capabilities

--Further investing in consistent global processes

--Expanding their offshore technical and quality skill sets

The research, "Low-Cost Global Delivery Model Showdown," also presents a more in-depth look at the unique strengths of each supplier, including a second weighting toward a simple, basic delivery model. A complete copy of the research is available to WholeView 2(TM) clients and can be found at www.forrester.com.

The Forrester Wave(TM) Methodology

The Forrester Wave methodology is open, rigorous, and unbiased. Forrester starts with an open criteria review process, verifies findings against customer interviews, and checks facts with vendors. This research is performed without sponsorship to help user companies make better vendor selections. Forrester does not charge vendors in any way to participate in a Forrester Wave.

About Forrester

Forrester is an independent technology research company that provides pragmatic and forward-thinking advice about technology's impact on business. Business, marketing, and IT professionals worldwide collaborate with Forrester to align their technology investments with their business goals. Forrester offers products and services in four major areas: Research, Data, Consulting, and Community. Established in 1983, Forrester is headquartered in Cambridge, Mass. For additional information, visit www.forrester.com.