Financial Daily from THE HINDU group of publications
Friday, Aug 20, 2004
Info-Tech - Software
'No clear leader in low-cost services delivery'
New Delhi , Aug. 19
DESPITE significant investments in skills, infrastructure and processes, none of the top onshore and offshore IT services vendors is a clear leader in low-cost global delivery model (GDM), according to a Forrester report.
The top three vendors in each of the category are Accenture, EDS and IBM for onshore, and Infosys, TCS and Wipro for offshore.
"To assess providers' progress in adopting a low-cost GDM, we graded the top three vendors from each starting point - onshore (Accenture, EDS, and IBM) and offshore (Infosys, TCS, and Wipro) - using 60 different low-cost GDM criteria. While all the six vendors are making significant investments in skills, processes, tools, locations, and infrastructure, none is fully entrenched in the leader category," a latest report by Forrester titled `Low-cost Global Delivery Model' said.
The study concludes that the offshore players need to add more domain expertise and improve account management to better interface with the business buyer, while onshore players need to fully embrace capability maturity model integration (CMMI) and encourage their account teams to more consistently utilise its low-cost GDM capabilities.
Forrester defined GDM as integrating rich domain expertise, broad technical skills, and project management discipline across a network of low-cost locations through consistent and robust processes, tools, and infrastructure to maximise the timely delivery of superior IT and BPO solutions.
Elaborating on the concept, the report said that traditionally, large IT service providers have had a vast network of offices in every country doing work for local clients or supporting remote operations for multinationals.
With the evolution to a low-cost GDM, technology services firms will not only rely on a network of in-country staff, but on the expertise in near and offshore locations.
A low-cost GDM works on a distributed development model where much of the work is done in a network of centres across different near and offshore geographies and not just in the local country where the client is located.
Factors such as higher user sophistication and shifting industry economics are forcing IT services vendors to ramp up their low-cost remote delivery capabilities.
"This is part of a broader shift to a more distributed, process-centric, low-cost global delivery model (GDM)," the report said.
The major providers had till now touted their global capabilities as a mechanism for serving clients locally wherever the client happened to be. This is in contrast to the low-cost GDM, which relies on using nearshore or offshore facilities to remotely service clients in other geographies.
According to the report, a growing number of companies have years of experience with offshore, and they are "pushing the envelope of existing providers' capabilities. They are looking to deepen their use of offshore by increasing the percentage of the IT budget going offshore; pushing traditional boundaries of what can be done in remote locations; broadening their base of suppliers by forcing onshore vendors to go offshore; and asking for more offshore vertical expertise."
Three factors driving the migration from simple offshore to full low-cost GDM include continuing cost pressures, growing diversity of locations and improving ability to manage complexities, it added.
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