GS100: 2011 Global Services Compendium

However, new scope application development work is still under pressure. Says Srini Koushik, Worldwide Executive Application Development, H-P Enterprise Services, “Though discretionary ADM spend (including consulting) appears to have hit rock bottom, the muted probability of a sharp rise exists. Most customers will like to fence-sit during 2011, fearing a double-dip recession. Hence, ADM revenues will predominantly derive from maintenance.”

Application management would also continue. According to Sachdev Ramakrishna, Director - Marketing, Steria India,” The application management market is expected to grow from $51 billion in 2010 to approx $63 billion by 2014 at a rate of 5.7 %. By 2014, key

Research carried by Zinnov and E&Y, indicates 80% of total software application spend goes towards activities to support the products that are in maintenance mode. Not only IT organizations have outsourced application development work, some are now handing over the day-to-day application maintenance work to third parties. In keeping with their low spend strategy, companies are now focusing to tap into newer opportunities and newer customer requirements. ADM market has become one of the key elements of the global business, the size of the global software product market is in the range of USD 300 – 320 billion. ADM spend of companies in software product vertical is in the range of USD 45 – 48 billion.

Key Themes

The key themes that dominated the
market in 2010 were cloud, agile, security, analytics, improved delivery through better collaboration and insight and a greater focus on enriching the experience and engagement of software users. Thus far, these themes have held sway as vendors and end-users alike look to take advantage of new delivery models, the explosion digital content, more pervasive network connectivity and the continued proliferation of smart handheld devices. In 2010, all the leading players have enabled sections of their portfolios as cloud service offerings.

Web Services and service-oriented architecture (SOA) have been obscured by the attention lavished on cloud. Conceptually, SOA is still perceived to be important, it is just that organizations have been forced to look at the immediate implications of cloud. Whether SOA will come back in the same form and name is still a question. The opening of access to data and systems around the organization and the possibilities for new application innovation will increase the pressure on design and end user experience and engagement. In that sense, SOA may return in another garb. More interestingly the consumerization of IT and the focus on  "experience" design is likely to gain momentum outside the usual incumbents of Microsoft, Adobe, Google and Apple.

                     GS100: 2011 Global Services Compendium

deals witnessed huge shift, in terms of deal value and market adoption. Contract-signings that were delayed during the recession months are now in full-swing, service vendors are reporting healthy results. After a slow start to 2010, the number of deals announced in the ADM sector bounced back in Q2, with an increase of 14 per cent on Q1, according to Ovum. MNCs together with government organizations signed higher value, scope and duration deals compared to offshore suppliers. Large buyers preferred input based pricing with offshore suppliers and complex pricing with MNC suppliers.

The biggest IT services deals have been dominated by US federal government and defense agencies. US and UK together with federal government and defense agencies were responsible for around 60-70% of the major deals in ADM. Ovum reveals that the second quarter of 2010 was the best for 12 months for the sector in terms of the number of deals announced. Public sector demand remained steady, particularly in the US, which accounted for more than 90 per cent of the market’s quarterly total contract value (TCV). This was good news for vendors with a major focus on the US government sector, notably General Dynamics, Lockheed Martin and SAIC.

Half of the top ten deals involved either federal or state and local agencies, including the mega-deals awarded by NASA and the Department of Homeland Security. Science Applications International Corporation (SAIC) has been the most successful vendor operating in this vertical market throughout the year, and it added a deal with the GSA worth $208m to its big win with NASA. SAIC has announced 15 contract wins in the first three months of 2011, with a combined value of $5.1bn.

Some of the biggest ADM deals announced were valued at over $1bn, and these mega-deals were awarded to Lockheed Martin, Serco, VT Group and Amsec (a subsidiary of Northrop Grumman) by the Space and Naval Warfare Systems Command (SPAWAR), US Navy. The energy and utilities industry bagged few important outsourcing deals, Oil and gas giant Royal Dutch Shell chose Logica to support its Commercial Fleet in Europe and Asia whereas, Logica, underwent partnership with FleetCor Technologies, will provide the technology platform and underlying business processes to run Shell’s fuel card portfolio. The Nuclear Regulatory Commission underwent a 6-year, $252 million contract with Dell’s Perot Systems, to provide a full scope of IT application services.


outsourcing is in a state of profound change, where businesses are forced to accomplish new levels productivity and sources of revenue simply to survive. Small and Medium enterprises (SMEs) are coming up as a huge market in the emerging geographies and one of the key growth drivers. The ADM outlook will shift remarkably in coming years. With higher adaptability of outcome-based models, ADM outsourcing is not alone about moving application development out of the country – the core issues are about trust and demonstrating real business value and competency.
                     GS100: 2011 Global Services Compendium

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