May 29 2006

Accessible Globalization

Published by at May 29, 2006 3:03 am under Globalization

Why do firms continue to evaluate outsourcing and globalization? A 2005 study performed by IBM’s T.J. Watson Research Center investigated the long-term effects of mature outsourcing organizations — ones that had outsourced a major portion of their IT infrastructure between 1998–2002 — and found that these companies continued to outperform their peers in Sales, General and Administrative (SG&A) efficiency.

Others can reap similar benefits without outsourcing significant portions of their organization, and this article analyzes accessible globalization — the trend to focus on the smaller, non-enterprise (anti-megadeals), and how companies utilize and benefit from outsourcing on a lesser scale. Let’s look at specific examples of lessons learned and provider capabilities in areas such as Application Outsourcing (AO), Research and Development (R&D), market research, office applications and analytics and accounting. Interestingly, it is not only labor arbitrage that is fueling this growth, though it does remain a critical factor.

Several research firms, including Gartner and Forrester, report that megadeals are shrinking in IT and business process outsourcing, yet Gartner predicts that the market will grow 7.3% from 2004–2009. This data indicates that the market is active, but full of smaller deals — many that never hit the public radar screen. Specific trends supporting this projection include that IT is breaking up into best-of-breed solutions, and there is an active market for smaller back-office and administrative processes such as Human Resources (HR) and accounting.

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