outsourcing trends

The stereotypes commonly circulated about outsourcing are becoming increasingly farther from the truth. Western firms that outsource their information technology work are relying less on traditional markets in Southeast Asia to fulfill large chunks of services and more on providers in Central and Eastern Europe to do customized and compartmentalized tasks. Recent research indicates that IT outsourcers are seeking greater knowledge of and attention to specific products and services and that the successful labor providers are those that show adaptability and response to their clients in a variety of ways.

Results from the 2008 Black Book of Outsourcing survey of top IT company executives reflect the growth of the Central and Eastern European markets compared to their Asian counterparts. The Black Book research as well as a Forrester Research study indicate that IT companies are redirecting their outsource spending toward providers that can come up with more than just simple labor. Another study that focused on healthcare firms found that while they are becoming less likely to outsource the bulk of their IT departments, the successful outsource providers are the ones that are taking a more integrated and active role in the company.

IT Outsourcing Map Changes As Industry Evolves

Central and Eastern Europe have gained a foothold in the outsourcing market by embracing a style that seems antithetical to the longstanding practice of providing cheap labor in the absence of government regulation, environmental policy, and positive public relations. Several key cities in the region compare favorably to traditional locales in Russia and Southeast Asia when ranked in a Black Book survey measuring sustainable policies, attractiveness to employees, the business environment, and the financial environment. “Many people, when they looked at outsourcing, were looking to move their operation to a low-cost country, and I think a lot of those advantages became short-lived,” says Doug Brown, co-author of The Black Book and subsequent surveys.

Brown notes that much of what sets the European markets apart is an investment in building a skilled workforce that pays higher dividends than the cheapest possible labor. “People have the training, so they can see beyond just their tasks,” he asserts. “They can see how they can actually solve problems for their client companies.”

Kyiv, Ukraine, for example, scored 20 out of a possible 25 points in the category that measures worker training, skills, and education, lifting its total score over competitors in Russia, India, China, and the Philippines. Seven Central and Eastern European cities scored a 20 or higher in this category, likely due to an ample and highly structured educational infrastructure similar to those in Western nations. “The talent, the training…in many ways these different policies are developing a social community there, giving back to the community as well as the environment,” adds Brown.

In the Ukraine, where more than 70 percent of the people possess at least a secondary education, a dozen universities were cited in a GoalEurope study for their excellence in computer science education. GoalEurope also reports that the Ukraine government is upping educational spending from between three and four percent of its gross domestic product to 6.5 percent.

This increased educational commitment is reflected in Brainbench’s 2006 Global Skills Report, which ranks the Ukraine fourth in the world in overall IT certifications. The nation ranks in the top five for certifications in SQL (ANSI), RDBMS concepts, C++, and software testing.