The local outsourcing sector is gearing itself up for a good year in 2009, as companies look to reduce costs.
Clinton Jacobs, research analyst at BMI-TechKnowledge, explains that the trend is driven by companies rationalising and focusing on their core business.
Donovan Muller, senior executive for outsourcing in Africa, at Accenture, says companies should see next year as an opportunity to reinforce and strengthen their operations.
“There is a definite slowdown happening,” he says. “We don't fully understand the impact of it and how long it's going to take.”
The result of this uncertainty is that companies are looking at outsourcing as a cost-cutting measure. A recent report by research firm IDC, on the effects of the worldwide financial crisis on IT spending, states that, globally: “The IT services market will feel the recession as demand for project-oriented services will be affected, and pressure may abound to renegotiate existing outsourcing contracts.”
Jacobs explains the local trend, saying: “The trends in outsourcing are a move toward more selective outsourcing rather than a total outsource and hosting of infrastructure services and application management.”
But he cautions: “The economic landscape in general will be tough for all.”
The reports also points out that silver linings do exist, saying: “The outsourcing market will get an extra boost, reflecting efforts to further reduce non-discretionary IT expenditure.”
This boost in outsourcing will occur as companies take a cautious approach to spending, notes Muller. “Companies will now look at how they apply their spending. They now need to focus and optimise their budgets and spend in a way that will help sustain the business.”
Jacobs further notes that: “The hosting of infrastructure reduces the capex investment required and can provide significant savings. The skills shortage will also provide impetus to the IT outsourcing industry, as companies don't have the necessary staff to maintain their IT environment.”
Muller notes that, despite positive projections for next year, the company should pay close attention to global trends. “The key thing now is how do we use the global model to understand where we can become more efficient and help companies build on platforms which will allow companies to grow.”
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