Q. What's your outlook for the outsourcing market in 2007?
For the Singapore scene, 2007 will see major outsourcing decisions being made, for example, in SOE (Standard ICT Operating Environment) and other government projects. This will set the scene for outsourcing in the government sector.
We should see rapid progress of the Intelligent Network 2015 (iN2015) initiatives, which includes plans for a new national broadband network that will allow both e- and m-transactions to really flourish. We should see the emergence of more shared service centers for government and commercial enterprises. There will also be more offshoring to lower-cost countries like Malaysia, China, India, and the Philippines.
Despite the initial emphasis on cost reduction as the reason for outsourcing, enterprises are going to appreciate the fact that having good partnerships with outsourcing providers is crucial to sustained results from outsourcing. This is because enterprises are under pressure to cut costs and to transform their businesses in order to expand and capture the global market at the same time. Hence, having good partnerships and sufficient maturity in managing outsourcing relationships would be critical to successful results.
Although there will be temptation to pull back a bit and have multi-sourcing relationships, involving internal and external providers, enterprises may find the overheads for managing multiple relationships just too energy sapping. Aside from this, the SMBs are going to subscribe to more IT services. There will be an emergence of ASP (application service provider) type of services that will be less customized, affordable and simple to subscribe to. Overall, as the outsourcing market matures, growth will be a modest 5 to 8 percent.
Can you name one prediction that the analysts got wrong or right about the outsourcing/IT services industry last year?
2006 was a year of searching. Many enterprises (government and commercial) were looking for the best or optimal combination of insourcing and outsourcing. Hence, the level of outsourcing was lower than expected. This is natural as enterprises needed to find their respective comfort zones for outsourcing. Going forward, people are going to be more aware that in the whole game of outsourcing, there are processes, people, technology and information to be considered, and that the management of outsourcing will mature very quickly as enterprises are forced to learn to manage the various types of risks because of keen business competition.
Name one issue that could put a damper on corporate IT budgets for outsourcing in 2007?
Any internal or external calamity or disasters could cause budgets to be cut. Such calamities could be natural, viral or incidents like security exposures, major compromise of customer records or the like.