“I speak at world-class events all over the world including those hosted by Sourcing Interests Group (SIG) and IAOP. All three organizations are doing great work for their memberships, but the dynamics of NASSCOM are truly impressive,”
The full report details three insights that act as a guide to today and a prediction for tomorrow:
1. Focus on value and rapid growth – At the event, industry legend Vikram Talwar pointed out a number of issues the sourcing industry must contend with, including an exhortation to stop the price wars and focus on value.
Matching the current 16-18% growth rate in BPO and slightly lower for ITO was a huge topic for the attendees. Some providers with specialization by industry or function are optimistic that they can beat this year’s market prediction. Those without a specialization seem to be replacing the head of BPO and retrenching their strategies.
2. Benchmarking 2012 pricing changes - Through our ProBenchmark database, Alsbridge has seen FAO prices reduce by five-seven percent on a like-for-like basis over the last 12 months and forecasts this rate to slow to three-five percent over the next 12 months. However, the range of current prices for individual roles varies greatly, reflecting the lack of market standards for labor rates (see the recent ProBenchmark pricing trends webinar for more information)
“It was clear that Indian-based providers are struggling to control their constant price war mentality due to their reliance on internal price benchmarks. At this point, under pricing is their biggest challenge,” Trowbridge explained.
Some niche BPO providers are starting to gain scale in focused segments such as healthcare and analytics and knowledge management. Look for interesting value propositions in 2012 for segments of BPO not fully addressed in the past.
3. Prepare for the future - Western-based providers are facing a determined competitor intent on continuing that 18% growth. To compete, Western-based providers will need a strategy that is focused and differentiated.
“India-based providers remain high quality and focused on winning contracts since their business development efforts will remain strong for the foreseeable future,” Trowbridge said. “If you engage properly, you can plug into a great wealth of talent at an effective cost point. Fail to engage right and you take unneeded risks.”
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Alsbridge provides world class sourcing advisory and benchmarking services for IT, finance and sourcing executives. With over 150 consultants located globally, we’ve helped hundreds of companies reduce costs and get more value from their vendors. Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your vendors. Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, hardware and maintenance, network services, software and maintenance, application support and development, business processes and cloud services. Alsbridge was ranked the #1 outsourcing advisor in the world by the International Association of Outsourcing Professionals (IAOP) based on the value delivered to clients. 500 fastest growing privately held companies in America.