The offshore market has reached "a unique point" as service providers continue to perfect the global delivery model and offer more domain expertise.
Posted Aug 16, 2007
Six companies have been named leaders in Gartner's 2007 Magic Quadrant for North American Offshore Applications Services, including Indian firms Infosys Technologies, Tata Consultancy Services, and Wipro Technologies, which were rated highest according to their ability to execute. In the span of just a few years, the research giant reports, the demand for application services delivered in a global delivery model (GDM) has risen significantly, with cost benefits, geographical distribution, and vertical market expertise being the key drivers.
Joining those three application service providers (ASPs) in the leaders quadrant are Accenture, Cognizant Technology Solutions Corp., and IBM, all cited by the report for their strong commitment to the GDM model.
Of the six leaders, Tata maintained its position as the largest and most-diversified offshore pure-play provider. The Indian firm invested in an aggressive build-out of a global delivery footprint beyond India (such as Latin America and Eastern Europe), with clients citing flexibility and responsiveness as its strengths, according to the report. Infosys was slotted as a leader thanks to its aggressive leadership and recognition for its capability to compete for and win large-scale application outsourcing. Wipro earned high marks for its strong brand awareness and for offering a comprehensive and balanced portfolio of application services.
Market demand for offshore application services is at "a unique point," says Frances Karamouzis, a research vice president with Gartner and primary author of the report. "Most buyers assume and require that some degree of globally delivered services will be included in their us of externally provisioned application services for cost benefits," While most buyers concentrate on the cost elements of providers' GDM and non-domestic labor pools, "as soon as they're involved in the evaluation process, they'll face far greater sophistication in providers' GDM sales, marketing, and value propositions than they did one year ago," she says.
The supply side--that is, the ASP community itself--is pushing the advancement of globally delivered application services more than the demand side, according to the report. Many offshore application service buyers haven't performed the "application rationalization" work needed for effective sourcing, Karamouzis says. As a result, tactical and project-based engagements in a global service model aren't uncommon. "Buyers with a vision to evolve to the full potential of globally consistent and efficient deployment of a global labor pool for application services probably will rely on key service providers that can help them fulfill this vision," she says.
"Vision," as it happens, seems to be something sorely lacking in the industry, if Gartner's assessment is any indication: Of the nearly 30 ASPs included in the study, none ended up in the research firm's "Visionaries" quadrant. ASPs that came close in terms of "completeness of vision" included:
Interestingly, U.S.-based consultancies Deloitte, Keane, BearingPoint, and Unisys were Gartner's four lowest-rated providers of offshore application services.
Karamouzis suggests that ASP selection has become more critical as buyers look to service providers for advice in navigating and optimizing the adoption of application services into their operations. "Service providers are being called on to move beyond low-level development functions and essentially provide world-class, domain-specific, leading-edge application competencies," she says. The result is that some ASPs will swim, and others will sink. "Many offshore providers are outpacing the market significantly, [with] the common denominator of their success being the growing sophistication and continued evolution of their global service models."
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