Growth Opportunities And Markets For It Outsourcing: New Possibilities For Contact Center, Infrastructure, Applications And Business Process Outsourcing

Growth opportunities and markets for IT outsourcing

Executive Summary

Market outlook

Market opportunities

Contact center outsourcing

Developments in infrastructure outsourcing

Developments in application outsourcing

Developments in business process outsourcing

The SMB outsourcing opportunity

Offshoring

Chapter 1 Introduction

What is this report about?

Who is this report for?

Definitions

Application development

Application hosting

Application integration and collaboration

Application management

Application testing

Back-up services

CRM (customer relationship management) BPO

Desktop server management services

Desktop software management services

Finance and Accounting (F&A) BPO

HR BPO

IT security management services

Knowledge processes (knowledge management)

Managed LAN services

Managed mainframe services

Managed messaging services

Network security services

Managed server services

Managed storage services

Managed WAN services

Mobile desktop services

Outsourced agent position (AP)

Outsourcing

Payments and billing

Secure communications services

Secure content services

Service desk

Site support

SMBs (small and medium-sized businesses)

Thin client management services

Threat and vulnerability management services

Web hosting services

Chapter 2 Market outlook

Summary

Introduction

Why IT outsourcing still represents a valuable market opportunity

What barriers remain

Chapter 3 Market opportunities

Summary

Introduction

Sales and marketing - is there a future for outsourced outbound calling?

Consumer hostility

Legislative challenges

High costs

Poor quality perception

Looking ahead: outsourced outbound calling is set to increase

Regional analysis

Drivers of outsourced outbound contact center services

Cost savings

Professional approach

Increased commercial opportunities

Outsourcers can leverage a number of strategies to increase outbound revenues

Emphasize professional nature of services to prospective investors

Show real cost savings

Emphasize abilities in value-added services

Outsourcing to improve customer service and reduce cost-to-serve

In contested mass consumer markets, managing cost-to-serve is a challenge

The UK energy utilities have managed cost-to-serve to differing

degrees of success

Infrastructure spending can deliver significant cost-to-serve improvements

Effectively designed infrastructure further facilitates outsourcing

Technology will determine by how much further the cost-to-serve can fall

Ongoing cost improvements will be technology driven, though

regulatory requirements will also impact

Outsourced voice services

Market outlook

Vendor strategies

Cost

Market awareness

Expertise

Selling the solution

Partners

The proof will be in the pudding

General vendor strategy points

Chapter 4 Contact center outsourcing

Summary

Introduction

What’s driving contact center outsourcing?

Reduced costs

Technology costs

Cost management

Quality of labor

Ample labor

Contact center outsourcing trends

Slowing growth in traditional offshore locations

Exclusive nearshoring - closer proximity but higher prices?

Profiting from ‘bestshoring’

New trends and developments

Hosted contact centers

Selling hosted contact centers

Video contact centers

Who is likely to purchase video contact centers?

Virtual contact centers

The customer-centric enterprise

Remote working

IP telephony

Small and Greenfield contact centers

Hosted IP contact centers

Implications for vendors

Chapter 5 Developments in infrastructure outsourcing

Summary

Introduction

Infrastructure outsourcing is the most mature IT outsourcing domain

New trends and developments

Managed and outsourced network services represent a large but slow-growing market

Network, voice/data convergence and security services are the highest growth markets

Trends in mobility, security and applications are influencing networking contracts

Security is now permeating most networking services contracts 86

Security and privacy managed services is the fastest growing infrastructure services market

Enterprises are looking for dedicated third-party security services expertise

Embedded security in other infrastructure services may negatively impact demand

There is good growth in all the S&P managed services sub markets

Banking is the largest target market for security services providers

German and UK enterprises’ stricter security approaches provide good opportunities

The hosting services market

Cost control and a need to manage infrastructure complexity are driving hosting services demand

Capacity and power supply are the two main inhibitors to market growth

The hosting services market has now fully rebounded from its problems earlier in the decade

Financial services and government are the most prominent vertical markets

Large enterprises have the most pronounced hosting requirements

Storage services revenue growth is strong, relative to other infrastructure

services

Back-up is growing strongest but the managed storage services market represents the cash cow

Managed and outsourced desktop services is a mature infrastructure services market

Desktop services will increasingly be positioned as part of wider infrastructure outsourcing contracts

Demand for desktop services is always positively impacted by the release of new operating systems

Desktop maintenance is a low-growth market opportunity

Remote management is driving the market for service desk

Site support market growth is set to be low

Chapter 6 Developments in application outsourcing

Summary

Introduction

Access to expertise and the latest technologies are primary motivators

New trends and developments

Integration and packaged applications are end-user priorities

Service orientated architectures

Outsourcing packaged applications is most likely amongst verticals with less

in-house IT

Total application outsourcing: a new trend?

The offshore impact

Overcoming the roadblocks

Vendor recommendations

Help clients reduce IT complexity to improve efficiency and reduce cost

Package professional services as part of the deal

Assume the position of trusted advisor

Provision low cost service centers to provide the best mix of offerings

Position services to take advantage of growing SMB adoption and complete

outsourcing contracts

Flexibility through range of offering and pricing creates the most opportunity

for vendors

Regional and industry specific knowledge is required

Demand for ‘global sourcing’

Chapter 7 Developments in business process outsourcing

Summary

Introduction

BPO deals shrink in scope in spite of growth in signings

New trends and developments

Investment priorities in BPO are shifting toward non-traditional services

Newer, high-margin BPO services are a growing priority for customers

Risk and proximity are strong factors in the offshore decision process

Retail banks fear the classic inhibitors to offshore BPO

Offshore BPO slowdown expected as voice BPO becomes a

commodity

Evolution in the BPO offshoring market

Further vendor recommendations

Expand their portfolio to create flexibility and insulate against

commoditization

Don’t disregard CRM outsourcing

BPO services appeal to a broad spectrum of adopters for a variety of reasons

Offshoring is an important part of the BPO market but there is still a strong

need for market education

Vendors are less likely to risk larger, more complex deals

European BPO is far from a developed market

There is significant scope for consolidation amongst vendors in this market

Vendors should manage the sales process

Multi-process deals a likely feature of the BPO market for some time to come

Chapter 8 The SMB outsourcing opportunity

Summary

Introduction

SMBs show traditional attitudes to selecting IT vendors

SMBs are more likely to trust a national telecoms provider or a national ISP

for managed services

Many different vendors are supplying the UK SMB market

SMBs are generally happy with their service providers

A relatively low proportion of SMBs currently oursource their IT

services

The majority of SMBs manage their firewalls in house

Security is a key consideration in IT outsourcing decisions

The area that is most outsourced is security updates and patching

The most pressing technical requirement for SMBs is security

SMBs look to vendors to provide security and Internet connectivity

The majority of SMBs have some form of risk mitigation in place

Barriers to outsourcing

Cost and loss of control

A small proportion of SMBs can foresee a time when their IT function is fully

managed externally

Conclusions: outsourcing is still a relatively low priority for SMBs in the

UK

Chapter 9 Offshoring

Summary

Introduction

The benefits of offshore outsourcing

Industry difficulties that can be addressed through offshore

outsourcing

Offshore outsourcing can lead to significant cost savings

While cost savings is the main advantage to offshore outsourcing,

relatively higher quality labor is also a primary driver

But not all companies are ready for offshore

Some processes are more conducive to offshore outsourcing than others

Different offshore locations offer distinct advantages

New trends and developments

Vertical expertise will become an important competitive differentiator in

offshore outsourcing

India’s offshore outsourcing market

India’s domestic market presents real revenue opportunities

India still offers investors a very low-cost business environment in

the medium term

That said, beware of potential erosion of India’s value proposition

over long term

Contact center offshore outsourcing in Central and Eastern Europe is

projected to grow through 2010

Why Central and Eastern Europe is a logical location for Western

European customer service

However, outsourcing to the CEE could prove limited over the

long-term

Vendor recommendations

Contact center outsourcing in North Africa is growing fuelled by offshore

demand

North Africa is attractive for Western customer care investors

There are still certain risks of which investors should be aware

Vendor recommendations

CALA: Looking beyond Mexico

Brazil’s domestic market offers outsourcers opportunities to profit

Outsourcers should look to Argentina and Chile for bilingual

customer service

Vendor recommendations

Index

List of Figures

Figure 2.1: Enterprise outsourcing and managed services market conceptualization

Figure 3.2: Global APs in outbound sales and marketing functions, 2006 - 2012

Figure 4.3: Which functions are you likely to outsource in the next year?

Figure 4.4: Whether you do or do not outsource please rate the importance of these criteria inchoosing an outsourcer?

Figure 4.5: Indian and Philippine outsourced AP growth, 2005 - 2010

Figure 4.6: Customer service silos

Figure 4.7: Remote workers as a percentage of total APs globally, 2005-2010

Figure 4.8: Total IP APs and IP APs as a % of total

Figure 5.9: Solid, if unspectacular, growth is forecast in infrastructure outsourcing and managedservices

Figure 6.10: Investment priorities in applications

Figure 7.11: BPO services globally, 2006-2008

Figure 7.12: Investment priorities in BPO

Figure 8.13: When selecting an IT vendor the most important factors are the standard of customerservice and SLAs

Figure 8.14: Only a small proportion of SMBs choose to outsource the management of theirfirewalls

Figure 8.15: SMBs expect vendors to provide security and Internet connectivity services

Figure 8.16: 40% of SMBs state cost as the strongest reason preventing them from outsourcing

Figure 9.17: Indian offshore outsourced demand, 2005 - 2010

List of Tables

Table 4.1: Global hosted APs, 2006 - 2010

Table 5.2: Global managed and outsourced network services market revenues 2005 to 2009 ($m)

Table 5.3: Security & privacy managed services market revenues 2005 to 2009 ($m)

Table 9.4: Indian outsourced APs, 2005 - 2010

Table 9.5: CEE outsourced APs (000s), 2005-2010

Table 9.6: Key themes for evaluating emerging CALA offshore locations