According to the experts, 2014 will not be a banner year for IT spend on outsourcing, because of the concern of don’t fear the shrinking budget for outsourcing. Forrester and Gartner both agree that IT outsourcing spend in 2014 has weakened. Gartner attributes the slowdown to sharply reduced pricing by the big vendors, while Forrester says the weakness results from a purchasing cycle that saw investments in outsourcing projects pushed off in 2013, which will create a little bit of a boom in 2015.
For a nearshore software development company like ours, predictions about IT spend don’t provide a complete picture. This is because outsourcing decisions are evolving, just as the nature of outsourcing projects and partnerships are evolving. In fact, Gartner points out that 70 percent of IT outsourcing contracts will be renegotiated by 2015, and 80 percent of those will result in the adoption of cloud-based services.
These trends make perfect sense to us: what we hear from our customers is that traditional IT outsourcing simply doesn’t work well for many companies. Because traditional outsourcing relationships focus on the project spec, not the business strategy. In other words, most outsourcers fulfil the requirements of their project specs, without knowing or even necessarily caring about the mission-critical reasons for the project.
As a result, customers get exactly and only what they pay for: a product. To build on Gartner’s analysis, the product-centric approach to outsourcing engagements contributes to the commodification of external teams: prices continue to drop, which further underlines the idea that all external teams are interchangeable.
This is why we’re not in the business of traditional outsourcing. We’re nearsourcers offering remote software development teams that truly operate as extensions of our customers’ teams. With this consultative, project-management approach, we deliver both massive price advantages, and value far above and beyond the spec. We deliver: solutions.
So if you’re an IT executive planning to reduce your outsourcing budget in the next year, give us a call. We’d love to talk about it.