Top 10 outsourcing stories of the year
Mega-deals, culture lessons, China vs India and much more...
Outsourcing made the headlines in 2007 with some huge deals both signed and terminated and the continued rise of the homegrown Indian IT services players competing against the traditional industry heavyweights.
The year saw some big deals and acquisitions but also the end of some notable relationships. While the AA terminated a deal with IBM early, Reuters splashed out on a £500m contract with Fujitsu Services and UK outsourcing services company Xansa was bought by Steria.
Not surprisingly offshoring was also high on the outsourcing agenda and although India continues to dominate that market, China is snapping at its heels along with a raft of smaller countries all aiming to find their niche in IT services globalisation shake-up.
Here's the top 10 outsourcing stories of 2007:
1. Xansa bought for £472m by French outsourcer Steria
In July, the UK IT services group Xansa was bought by French giant Steria in a deal worth almost half a billion pounds.
With the addition of 8,000 employees - 5,000 based in India - the combined company swelled to a headcount of 20,000 making it one of the top 10 IT outsourcers in Europe.
2. Exclusive: AA terminates £50m IBM deal
In September, silicon.com reported on the end of a major outsourcing deal when the AA terminated a £50m contract with IBM three and a half years early following its merger with Saga.
The end of the deal started the process of bringing data centres and infrastructure back in-house from IBM, which is likely to take a year to complete.
The deal was signed in 2005 when the AA separated from Centrica and needed to build an entire IT department and infrastructure in just 12 months.
3. Reuters inks £500m outsourcing deal
One company that dived into a significant outsourcing deal in 2007 was news giant Reuters, which signed a huge £500m 10-year deal with Fujitsu Services.
The deal will see Fujitsu Services roll out a standardised IT platform across the globe with 300 Reuters IT staff moving over to the IT services company.
Reuters CIO, David Lister, told silicon.com the contract would solve a lot of legacy issues that the company had been dealing with.
4. Five hot outsourcing trends to watch
With outsourcing remaining a major issue for business, silicon.com took a look at five major trends people should be keeping an eye on.
One of the major themes was that China will increasingly challenge India as the top outsourcing destination, while Brazil, Egypt, Poland and Russia will emerge as prime locations.
There was also emphasis on eco-friendly outsourcing, meaning outsourcing firms will increasingly need to sell their green credentials to win business. And there was even talk of virtual worlds being involved…
5. Skills Survey 2007: Offshoring still a hot potato
The annual silicon.com skills survey found offshoring is still causing concern for some IT professionals, with a third of those surveyed saying they feel their job is threatened by offshoring.
However, there was some ambivalence towards the movement with almost a quarter of respondents saying they aren't sure whether offshoring is a threat to their jobs or not.
6. China no tech rival yet, says India
Although India remained the pre-eminent offshoring destination in 2007, China was increasingly seen as a threat to its dominance.
But Nasscom, the India tech industry association, sought to quell such talk saying that although China should not be ignored, it'll be some time before it truly challenges the current status quo.
7. Revealed: The top 30 offshoring destinations
And it's not just about India and China. Analyst Gartner named the top 30 locations for offshoring, including countries as diverse as Costa Rica, New Zealand and Sri Lanka being named as viable outsourcing destinations.
The list took into account a wide range of issues such as cultural compatibility, education and language - showing that cost should not be the only consideration.
8. Photos: Bangalore's Electronics City
silicon.com editor, Steve Ranger, took a trip out to India in the spring, visiting some of the major tech hubs that have emerged in the last few years. Visiting Bangalore, Hyderabad and Pune, the India Special Report explored the reality of India's tech ambitions.
This photo story showing the Infosys mega-campus in Bangalore's Electronics City shows just how big the tech industry is becoming in India.
9. Offshoring - culture lessons are crucial
Understanding cultures and different ways of working was named as one of the biggest issues in making offshoring deals work by
IT chiefs at silicon.com's CIO Forum in October.
During a panel debate Rob Fraser, ex-Boots CIO, said offshoring shouldn't be treated in a "cavalier way", while other panellists stressed the importance of visiting locations before striking a deal.
This echoed a story from a year earlier when an Accenture study said cultural difference are one of the main reasons why offshoring deals run into problems.
10. CIOs plan more outsourcing
And outsourcing is going to continue to be a major issue for IT bosses, with 93 per cent of more than 650 UK CIOs surveyed by Forrester Research saying they plan to maintain or grow their current offshore software development during the next year.
The research also found that saving money is no longer the main priority when considering outsourcing, with three-quarters saying responsiveness and flexibility are the main drivers.
This was reflected when it was reported that the total value of outsourcing deals in Europe, the Middle East and Africa rocketed in the second quarter of 2007 and the UK led the way.