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The Year of the SpecialistsAs we look at outsourcing for 1999, some segments of the industry are maturing, particularly in the data processing and IT arenas. There is starting to be a significant amount of standardization in specific service segments, such as data center, desktop, telecommunications and server management. Along with that standardization, specialist companies are emerging, pushing their expertise in areas like desktop. For example, Unisys and Compaq -- with its purchase of Digital for its service and outsourcing operations -- now rank strongly in the international desktop arena. AT&T is emerging as a dominant force in the telecommunications arena, having purchased IBM's telecommunications business. ENTEX is emerging as a very strong player in the U.S. market. These specialist companies are driving best practices in their areas of specialization. While standardization helps drive strong price competition and probably higher quality service at the service level, the strong single outsourcing suppliers such as EDS, IBM and CSC are still competing effectively. We see a continuation of the mega-deal, particularly in government and in industries that are restructuring, such as telecommunications, utilities and banking. GlobalizationGlobalization is being rolled out in Australia/New Zealand, Europe, and more recently in Asia, in places such as Korea and Japan. It is continuing to happen at a tremendous rate, driven by the quest for international competition and stirred by the Asian Flu. As Asian companies look to restructure, they are increasingly looking to outsourcing as a vehicle. As a result, industrialized countries, such as the U.S., now face stiffer competition from Asia in their domestic markets. Beyond ITOutsourcing is transcending its traditional IT and data processing boundaries. The growth rate of business process outsourcing is outstripping that in the IT arena. We see significant grow in such areas as logistics, human resources, building facilities management and back office accounting services. The concepts of outsourcing have been tested and proven in the IT arena and now are being widely adopted in non-IT areas -- often by the same companies that have proven them in the IT arena. New suppliers, however, are stepping into the BPO arena. Ryder has entered the logistics area effectively, and the Big Six, led by PricewaterhouseCoopers and Ernst and Young, are active in the administrative back office market. Any discussion of outsourcing would not be complete without mention of Y2K. It has been a significant factor affecting data processing outsourcing in 1998, and will continue in 1999, as companies hesitate to outsource while they focus on a remedy. We believe that once remedied, companies will shift their attention back to outsourcing. That sets the stage for a huge boom in outsourcing in 2000. What the Year 2000 has done, as companies look at large investments to remedy their systems, is bring home the fact that many of these factors are non-core and might best be done by a third party. The net/net is we expect this realization to drive a significant boom in IT going into the Year 2000. Whether that will begin in 1999 is unclear, but it is a phenomenon that bears watching. This, then, is our overview of the future of outsourcing in 1999. As you will see from our 1999 editorial calendar that appears in this issue, we will be revisiting some of these topics through the year. That's just part of our ongoing effort to be your best information resource on the outsourcing industry. Peter Bendor-Samuel is president of Everest and publisher of InfoServer. Publish Date: January 1999
For more information... Copyright © 1999 - Everest Partners, L.P. |
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Here at InfoServer, we once again find ourselves thinking
about the future. As part of our mission to help our readers make good outsourcing decisions, we publish the annual forecast issue in which we invite the best and the brightest in
the industry to share their insights. Three of the voices regularly present -- the analyst, the supplier, and the legal -- are represented here. The awards issue in February will focus exclusively on the customer voice.
