IT Outsourcing Game Set To Change Big Time

Major U.S. IT outsourcing firms, including Accenture and IBM, will face tougher competition from smaller firms, says a report AMR Research. A big reason for the shift: F1000 firms are now willing to break up their mega-outsourcing sole-source contracts, and issue smaller RFPs to find best-of-breed specialty providers.

by Vance McCarthy

Tags: Outsourcing, Outsourcing Firms, IBM, Vendors, ESB, Contracts, Specialty,



Major U.S. IT outsourcing firms, including Accenture and IBM, will face tougher competition from specialized and offshore firms over the next two years, says a report just released from AMR Research.


One big reason for this shift: F1000 firms are now willing to break up their mega-outsourcing sole-source contracts, and issue many smaller projects to best-of-breed providers.



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The biggest U.S. outsourcing firms are those most at risk, AMR said, and include Hewlett-Packard, EDS and Computer Sciences Corp., as well as Accenture and IBM.



Here's why ARM says the stars are lining up for big changes in outsourcing:


  • As much as $100 billion in 1-vendor outsourcing deals are set to expire in the next two years. The biggest U.S. outsourcers hold 72% of these contracts.

  • F1000 firms are more willing to take a "best of breed" approach to outsourcing, replacing a sole vendor for all outsourcing with multiple vendors based on their expertise. [Supply Chain Review magazine cites that General Motors has already shifted its solo 10-year contract with EDS to now 43 separate RFPs.

  • SIs and outsourcing firms may be forced into increased merger and acquisition activity to keep customers and expand expertise, but AMR suggests this move by the big guys to keep their market share may actually increase opportunity for smaller specialty outsourcing firms, as CIOs become increasingly wary about doing all their IT support business with a single company.




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