Offshore Outsourcing Services Get A 'Thumbs Up'

A privately circulating commentary by the Gartner Group predicting IT cost reductions through automation and job cuts is cheering offshore-outsourcing companies, because they believe their business models position them well to take advantage of the coming trends in IT.

A key advantage enjoyed by offshore outsourcers is their longtime establishment as global delivery service providers that aren't developing generic products, such as operating systems or applications software. In its commentary, Gartner said IT operations are eschewing the purchase of "expensive oversize software that requires complex implementation projects" in favor of automation and the use of offshore outsourcing to lower costs.

"Our overall focus has been on services," said Bill Budde, of Indian outsourcing firm Patni Computer Systems, in an interview. As vice president and general manager for Insurance and Benefit Management Services at Patni, Budde is seeing the future of IT playing out in his industry.

Patni has had its enterprise systems management (ESM) operation in place for years and is, therefore, strategically placed to exploit the coming IT activity in the insurance industry. With continuing mergers and acquisitions in the vertical industry segment a given, Patni can utilize its ESM sites in the U.S. and India to merge and integrate the different software platforms used by different insurance companies. The EMS sites--in Bedford, Massachusetts, and Bombay, India--are redundant and "follow the sun," providing services needed in different times of the day.

For instance, specialists in India and the U.S. are equally competent in popular operating systems, including Windows NT, Linux, and Unix.

Gartner interviewed and studied top Indian outsourcing companies doing business in the U.S. and globally, and found that the predicted changes--the most important were automation and offshore outsourcing--will have a "powerful disruptive impact on the worldwide IT market." The market-research firm predicted that five of the top 10 applications-software providers will be delivering software through their services approach, with 30 percent of new software expected to reach IT organizations in that way.

In its commentary, Gartner paints a tough and competitive IT landscape emerging over the next few years. "Many software and services suppliers," Gartner states, "are in a war of survival and have been forced to react to the emergence of alternative approaches based on the notion of SAAS (software-as-a-service) and services-orientated architectures."

Noting that India-based outsourcing companies have a history in engineering--Patni's founder, for instance, studied engineering at MIT--Budde said they have long followed an engineering approach in their companies, working to gradually fix and improve their services-based operations.

Gartner predicted that India-based external service providers "will lead the IT industry in IT process and service improvement" though 2005.