neoIT lists popular buyer, supplier predictions for 2005

Over 40 per cent of the offshore initiatives will not yield the anticipated savings, scale or risk diversification in 2005. The key reason for the disappointments will not be the supplier capability but buyer preparation and management, says a buyer prediction survey by neoIT for 2005.

neoIT, an offshore advisory and management firm, forsees a big year for offshore outsourcing growth in 2005. In its annual roundup of predictions for the coming year, the company sees increasing acceptance of outsourcing as a foregone conclusion for MNCs that must keep pace with global competition, supply and delivery models.

Terming offshore outsourcing as a corporate "must have", Atul Vashistha, CEO, neoIT, said, "Global sourcing has become a corporate mandate for both leading corporations and global service suppliers. The year 2005 will witness a bevy of M&A activity in the supplier market similar to General Electric's recent spin-off of its India BPO unit."

neoIT has also predicted the emergence of multi-country supplier and delivery models that spans the globe from India to China to Central Europe.

"In the client market, US companies will no longer be the dominant buyers as Western European firms create a strong demand for offshore services," added Vashistha.

Other top buyer predictions indicate that small and medium enterprises will finally be clients for offshoring as they weigh the benefits of offshoring due to budget pressures and more favourable political environment for offshoring.

Over 80 per cent of Global 2000 is predicted to have an offshore presence by the end of the year. The next "big" outsourcing industries will be manufacturing, healthcare and retail. Data security, compliance and risk management will outweigh cost in decision criteria as BPO accelerates.

Key supplier predictions indicate that supplier prices will remain stable overall due to increasing demand competing with qualified firms and resources. As complexity of processes offshored increases, price increase can be expected in certain IT and business process domains.

One of the key prediction is that 2005 will also see the first merger of a leading Indian supplier with a leading USA supplier. Many Indian BPO firms are expected to go public in 2005. Chinese firms are expected to enter the offshoring space in a big way in 2005. Instead of growing organically, these firms are expected to make headlines by strategically acquiring into the market.

While Central and Eastern Europe are expected to become increasingly credible markets for European clients, Russian IT companies will effectively position themselves as viable competitors in high-end niches. New entrants include South Africa, Argentina, Brazil, Thailand, Ghana, Spain, Mexico and others.