Long-established outsourcing models, which have seen third-party suppliers, take over the running of IT or business processes for organizations, are changing. Customers want IT services contracts to add value and suppliers want to increase their profit margins.
By using technology such as automation software, AI and cloud platforms, businesses can become more efficient without spending heavily with suppliers for human resources. At the same time, suppliers are increasing sales and margins, because they are not just adding costs in line with business volumes and are instead moving to non-linear business models.
As per reports IBM is truncating its offshore workforce are the result of cloud computing, automation and artificial intelligence (AI) shaking up the IT outsourcing sector, and 2015 could see acceleration in the sector's evolution.
In December 2014, IBM announced deals worth $3.6bn. However the company might not be as vocal as the fast-growing giants, IBM is quietly getting on with its alteration. Recent huge IT services deals are evidence that IBM remains a constant fixture on the contract lists of large enterprises. It is critical for suppliers to transform, as IBM has, if they are to burgeon.
The most conspicuous transformation will be seen in India, where suppliers that have grown through the provision of low-cost IT skills and business process outsourcing (BPO) staff have recognized the need to change. Recent reports that IBM is cutting back its India-based workforce and that India's biggest IT services firm Tata Consultancy Services (TCS) is cutting its own workforce suggest acceleration in this transformation.
According to advisory group ISG, between 2005 and 2008 India-heritage providers experienced average annual revenue growth of 32percent. That growth rate has since bisected to 16percent.
It has been happening for some time, especially in India where the revenues of the big offshore service providers have being growing more slowly.