Trends in Global IT Delivery and Management

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Trends in Global IT Delivery and Management

Sandra M. Notardonato

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.

© 2010 Gartner, Inc. and/or its affiliates. All rights reserved.

Key Topics:

Market Drivers

Competitive Landscape

Success in Global Sourcing

Future of IT Services

1

Globally Delivered Services Will Outpace

Growth of Worldwide IT Services Market

$946.6 B

Worldwide

IT Services

Market

$776.5 B

Globally Delivered

Services are estimated to be

9%

of total IT services market today

~$70bn

~$120bn-

$150bn

Globally Delivered

Services*

2009 2013

*Gartner estimate

not a Gartner forecast

By 2013, Globally

Delivered Services will represent an estimated

13.0% to 16.5%

of the total IT services market

Macro Forces, Issues and Considerations

Shaping Global Sourcing

Economic

Factors

CFOs driving IT cost controls

Cost-focused IT decision-making

Accelerates offshore services use

Geopolitical

Shifts

Globalization, emerging economies

War, terrorist threats, currency flux

Geopolitical risks must be considered

Government

Intervention

Protectionism vs. globalization

Pending industry legislation

Monitor changes and legislation

Provider

Viability

Provider focus on global delivery

Consolidation, hypercompetition

Buyer choices, but increased scrutiny

Buyer Priorities for Using External

Service Providers: Top Drivers

Ensure IT Availability/Uptime

('Keep the Lights on')

Reduce the Operating

Costs of IT

Enhance IT to Support

Business Operations

Enable Business Strategy

Change or Transformation

16%

16%

28%

0 5 10 15 20 25

Percentage of Respondents

= US Buyer

Top Driver

Top Driver

N = 1073

Note: Respondents rank ordering of top three drivers

Survey: Q4 2009, Economic Impact on IT Services Buying

Second Driver Third Driver

30 35

39%

What Changed in the Past Year? Offshore Use

Occurs More Often in 47% of US Organizations

Renegotiation Of Contracts With ESPs

Influence of CFO on IT Services Spending

Influence of Procurement Department on IT

Services Spending

Use of Offshore Services Delivery

47%

Use of Technology as a Service Offerings

Investment in IT Innovation

Development of Captive Centers

IT Spending Without Approval or Oversight of CIO or IT Department

= US Buyer

Occurs More Often

0 20 40 60

Percentage of Respondents

Occurs With the Same Frequency Occurs Less Often

80

N = 1073

Survey: Q4 2009, Economic Impact on IT Services Buying

100

Buyer Adoption: How Global Services

Delivery Has Evolved

Growth Creation Growth Maturity

I - Onsite

"Staff Aug"

II - Offshore

III - Global

Sourcing

IV - "Just"

Sourcing?

India

"Emerging

Megavendors"

Global

Sourcing is

Mainstream

Country &

"Value Chain"

Competition

Fully Integrated global process optimization

CMM

Level 5

"Body

Shopping

"

Y2K

From “Offshore” to

“Nearshore and

Offshore”

1979 1998 2008 2020?

Time

Global IT Services: Market Share Leaders in Fragmented Industry

• Low-cost onshore or global delivery is a factor for all major commercial provider's strategies

• Top 10 leaders account for 27.3% of market

• Average annual growth rate (2009 vs 2008) of top 10 leaders = -2.3%

• Average annual growth rate (2009 vs 2008) of all other providers =

-4.7%

• 92 providers have more than $1 billion in total IT services revenue

All Others

73%

Worldwide IT Services, 2009 Market

Share Leaders ($776.5B)

IBM(-6.6%)

7%

HP(-10.4%)

5%

Fujitsu

(-0.4%)

3%

Accenture

(-11.8%)

3%

CSC

(-6.5%)

2%

Lockheed

Martin

(3.1%)

2%

Capgemini

(-8.7%)

2%

NTT Data

(7.2%)

1%

NEC (4.5%)

1%

SAIC

(6.3%)

1%

Source: Gartner IT Services Market Share Analysis,

2009 - (X%) indicates provider's annual growth:

Gartner's 30 Leading Locations for

Offshore Services (2010)

Americas:

Argentina

Brazil

Canada

Chile

Costa Rica

Mexico

Uruguay

Europe, the Middle

East and Africa:

Czech Republic

Egypt

Hungary

Ireland

Israel

Morocco

Poland

Romania

Russia

Slovakia

South Africa

Spain

Ukraine

Asia/Pacific:

Australia

China

India

Indonesia

Malaysia

New Zealand

Philippines

Singapore

Thailand

Vietnam

Note: Reflects new Gartner Country analysis, October 2009

Consider These Three Main Factors to

Optimize Country Diversification

Providers

Marketing/

Brand

Global Delivery Model

Skillsets

Methodologies

Credible

Scale

Industry/Domain Expertise

IT Industry

Labor

Pool

Education/IT

Alignment

IP Protection

Country

Success

Language Skills

Technology

Skills

Industry Associations

Country

Legal System

Cultural Compatibility

Infrastructure

Costs

Education System

Government

Support

Politics and Economy

Accelerating Trend: China

– The Other Global

Delivery Center

China has emerged as one of the most frequently discussed offshore locations in

Asia/Pac for global delivery diversification

Government support in developing offshore IT services from China strong, through tax incentives (7% tax rate), subsidies, guaranteeing benefits, capital injections

- Ministry of Commerce Thousand-Hundred-Ten plan supports growth of outsourcing providers

Quality of labor pool improving, with plans to train 1.2M new skilled IT workers from

2009 to 2013

—areas of expertise in testing, coding, embedded software development, application development, and basic data analysis

China’s English proficiency has been on the rise since 2004—today written English considered acceptable, however still marginal in conversation for business needs

Infrastructure near global standards

—big competitive edge versus India

Wage rates competitive, particularly at entry level; lower employee attrition

Communist government in China showing stability, focus on high levels of GDP, financial systems improving

—needs to improve transparency and reduce corruption

Foreign direct investment, trading alliances basis for improving cultural compatibility

Financial support from government for vendors that reach CMM certification

Progress on IP and data protection, but remains challenge due to lack of enforcement

10

Know Which Relationship/Delivery

Approach is Most Suitable

Staff Augmentation Project Work

Systems integrator

BOT

Joint Venture

Captive Center

On-Site

Onshore

Nearshore

Offshore

Outsourcing/

Strategic Sourcing

There are multiple options for buyers. Relationship choices must link directly to the commercial arrangements (rate cards, SLAs, performance etc.)

Changes in the IT Services Competitive

Landscape May Impact Your Decisions

Hypercompetition

• Pick up in demand — but we expect fits and starts

• Cost-based decisions

• Many providers chasing

any

opportunity

(revenue)

• Vendor fundamentals:

Profitability,

Restructuring,

Downsizing,

Rebalancing

• India-based providers experience slowing growth

• New players in services

Consolidation

• Traditional approaches and organic growth may be insufficient to keep revenue on target

• Acquisitions: HP/EDS,

Tech Mahindra/Satyam,

Oracle/Sun, PWC and

Deloitte/BearingPoint,

Dell/Perot, Xerox/ACS

… and expect more

• European companies — likely targets

• Providers in solid cash positions will be favored to advance via strategic acquisitions

Innovation

• Systemic changes in

IT sector require responses

• Growth rates for new industrialized services

— SaaS, Cloud — exceed the market growth rates

• Leaders invest to reposition and catch early wave

— timing is critical

• Management discipline and long-term view to navigate an extended recession

New Models Shaping the Future of IT

Services

Business Value-Add

Optimization

Business

Strategy

Consulting

Custom BPO~HR~

Logistics~F&A

IT Consulting

Custom Solutions

ERP~SCM~CRM~BI

CRM Call Center

Creation

Vertical/Process-

Specific Business

Process Utility

Horizontal Business

Process Utility

App. Develop.

& Integration

Transaction

Processing

SaaS

Cloud-Based

Business Process

Services

Enterprise

One-to-

One

App. Mgmt.

Data Center

Outsourcing

Remote

Managed Services

Delivery

Cloud-Based

Application

Services

Shared

One-to-

Many

Desktop Management

Network Services

Hosting/

Collocation

Storage on Demand

Infrastructure

Utility

Cloud-Based

Application

Infrastructure

Services

Help Desk Outsourcing

Management

Network Utility

Access

Cloud-Based

System

Infrastructure

Services

IT Efficiency

Summary: Marketplace Trends We See in

Global Services Sourcing Today

Supply Side

Multicountry options

Global provider landscape

Increasing range of services

Resource management

Alternative Delivery

Models

Demand Side

Balanced portfolio of country choices

Provider selection complexity

Portfolio optimization in a global model

Global sourcing competencies

Customization/labor-based versus Automation

Trends in Global IT Delivery and Management

Sandra M. Notardonato

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.

© 2010 Gartner, Inc. and/or its affiliates. All rights reserved.

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