| GS100: 2011 Global Services Compendium | |||||||||||||||||||||||||
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The ADM segment is still the mainstay of the IT outsourcing market. Led by US-based majors such as IBM, Accenture, H-P, Cognizant and others and India-based offshore vendors like TCS, Infosys, Wipro, and HCL, ADM activity still constitutes a large chunk of the overall IT outsourcing. Recent years have seen the entry of other mid-tier vendors like Neoris, Auriga, and Softtek who have broken ground with non-India offshore delivery. However, India continues to be the leading offshore location.
The ADM industry is going through a significant transformation in their licensing, delivery and support models.
Have the reasons for outsourcing ADM changed? Many companies are outsourcing application development or maintenance for reasons beyond cost, notably for improving service and freeing up IT staff for more strategic work. Organizations are receiving four key benefits from their third-party relationships: more time for their IT staff to focus on strategic work, lower costs, and improvements in version control, life-cycle management, and in documentation of procedures and best practices. In other words, applications development services accelerate the delivery of high quality business applications with fewer defects, less rework and lower cost.
Despite a trend towards increased ADM outsourcing to lower-wage economies, the cost of developing and maintaining applications can still consume more than half of the total IT budget. Hence, the potential of Lean IT to increase productivity makes ADM a primary target within the IT department. McKinsey & Company states that applying Lean IT principles can increase application development and maintenance productivity by as much as 40%, while improving the quality and speed of execution.
New scope still to recover
Research carried by Horses for Sources Research (State of Outsourcing 2011 Study ) predicts 95% of buyers reporting positive outcomes. It also reveals that in-house delivery of IT application, maintenance and processes are still dominant in 2010-2011. ADM outsourcing saw 38% in-house activity together with 31% outsourced activity as sourcing model for managing the IT business. Companies are placing a renewed focus on aftermarket services, as well as maintenance, repair and overhaul services as a source for new revenue streams. Servicing existing products is taking on a greater importance.
| GS100: 2011 Global Services Compendium | |||||||||||||||||||||||||
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