SAN RAMON, Calif., Dec. 13 /PRNewswire/ -- An economic downturn in the U.S. will increase demand for global services in 2008 as the Fortune 1000 seek to reduce costs, but service providers will encounter substantial challenges to satisfy sourcing needs because of the falling dollar and acute labor shortage in India, according to a new report on services globalization by neoIT, the leading services globalization(SM) consulting firm.
neoIT's 2008 Globalization Trends forecast that the weakening U.S. dollar will negatively impact the profitability of providers further and prompt many vendors to aggressively renegotiate contracts and index wages to hedge against currency risk and salary inflation. At the same time, staff-constrained vendors will be under pressure to meet heightened demand for global services as cost savings become a high priority in a decelerating economy.
"Strong demand for global services will be driven by the need to cut costs as the U.S. economy slows," said neoIT CEO Eugene Kublanov. "India will remain the geographical focal point of services globalization, but emerging markets will assume a significantly larger role in fulfilling sourcing needs. For both buyers and providers of global services, 2008 will be filled with many opportunities, but also real challenges."
The annual assessment from neoIT examines demand for global services for information technology, human resources, finance, accounting, back office, front office, customer support, engineering and R&D. The report identified the following major trends for 2008:
-- Second-tier cities in India, as well as Latin America, Eastern Europe
and Asia, will provide an expanding share of global services. Emerging
markets, such as Canada, Brazil, Chile, Costa Rica and Mexico, will be
among the new hot spots in providing sourcing solutions.
-- Companies will consolidate the proliferation of service agreements and
attempt to standardize the terms of agreements. Greater contract
discipline will mean an end to the "grass roots" management of global
services.
-- The growing commoditization of global services will motivate vendors to
strongly differentiate themselves. Vendors will focus on
re-engineering their client processes and emphasizing their ability to
deliver tangible results as never before.
-- Software and information technology will remain the strongest segment
of services globalization, but engineering will outpace BPO to become
the second-largest segment of globalization. Engineering is growing
rapidly because skills sets in this category drive product development
and consequently new revenue.
-- The Finance & Accounting (F&A) market will reach critical mass as F&A
processes and pricing become more consistent standardized. Human
Resources services will continue to be fragmented because of resistance
with many companies to outsource this function.
-- The green outsourcing movement will pick up momentum in 2008 and move
beyond its earlier hype. Service providers will take concrete steps to
introduce environmentally business practices and to reduce their carbon
footprint.
A free copy of the 2008 Globalization Trends research brief can be downloaded at: http://www.neoit.com/pdfs/Whitepapers/OIv5i10_1207_Trends_2008.pdf
About neoIT
neoIT is a management consulting firm that helps leading corporations improve and grow their business by capitalizing on services globalization(SM). Through a blend of strategic advisory services and hands-on execution support, neoIT provides advice and management expertise on the globalization of Information Technology (IT) and Business Process Outsourcing (BPO) services. For more information, visit http://www.neoit.com/.
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