Why outsourcing will be different in 2009

During this economic crisis, the IT budgets of companies have been under heavy pressure and major corporations are looking at outsourcing as a means to save money. But, the companies who have already outsourced their IT operations are looking at better deals to further reduce the cost. Here are the changes that are expected to happen in the outsourcing industry:

• The traditional pricing model of time and material will be changed. Instead, the pricing will be more on transaction and results based - This model would demand more innovative approach to execute a project and will pose as a greater challenge to the project managers working in the outsourcing companies. It is not business as-usual execution for the management.
  
• Customers are also shifting towards short-term based contracts and fixed pricing models. This model will result in high productivity and optimized resource planning by the IT companies. Here, the IT companies will witness high utilization rate, thus reducing the 'bench' strength; especially at the time, when the number of projects are less.
  
• Customers will lean more toward multi-vendor approach, where a large portfolio will be distributed across different vendors. Though, this model is currently followed by some clients, it will gain prominence in the current year. This model ensures the distribution of risks for the customers, who are shaken by the Satyam's scam.
• Multi-vendor approach will definitely invite competition pressure, but there will be an 'opportunity in waiting' for the vendors.
• The projects will be more process oriented with heavy emphasis on transparency and data security. The outsourcing companies will try to avoid the data security issues that propped up in 2008.
  
• Till date, customers concentrated only on the project outcome. Now, they will also have their eye on their vendors performance as a company. The vendor's would also need to instill confidence in customers on any issue that may arise over the period.
• With allocations inclining more towards offshore., the Onsite-Offshore ratio will have an impact.
• With these heavy bailouts and treasury bond purchases, there is more chance of weakening US dollar and strengthening rupee. This will lead to change in pricing rates.
• There will be substantial opportunity in the consulting space. It will be a testing ground for the Indian companies.
• The next tier of western companies will consider outsourcing to save money and stay in the market.
  
• Finally, apart from India, other low cost destinations (China, Canada, Poland, Nigeria, East Asian countries..) will witness a considerable growth.