North American Cities Become Outsourcing Hot Spots for IT Solutions
Outsourcing is often associated with offshore sites where the cost of doing business is considerably lower. But when it comes to IT solutions, the best outsourcing locations might be much closer to home.
As reported by CIO, a new study from Everest Group finds that North America is becoming an appealing location for service delivery. In its recently published report, “Market Vista: Global Services 2016 Year in Review,” Everest explains that the need for companies to be close to their customers, alongside the growing use of automation, is making U.S. and Canadian cities attractive choices for IT delivery centers. This trend reveals San Francisco, Seattle and Toronto as hot spots for cloud, analytics and automation services.
Move to Digital Services
The Everest Group study found that North American locations accounted for more than one-third of new delivery sites (29 out of a total of 76) established by service providers in 2016, according to CIO.
Among the service vendors tracked by Everest Group last year, 63 percent of provider setups were focused on digital services rather than traditional services — a major increase from approximately 25 percent in 2012. This percentage is expected to remain high as service providers focus on expanding their digital capabilities.
“Over the past few years, the service providers we track in our Market Vista index have been more inclined toward opening innovative centers and labs that offer digital services, rather than establishing delivery centers that offer traditional IT and business process services,” Everest Group Vice President Salil Dani told CIO.
North American Hot Spots
Of the three emerging hotbeds for analytics, automation and cloud services, Seattle has experienced the largest growth, both in the number of service providers establishing delivery centers there and the number of full-time workers being hired, Everest Group says.
Long established as a vibrant hub for tech giants such Amazon and Microsoft, Seattle is also a favorite among digital startups. In addition, Google and Facebook have recently expanded operations there, reports CIO.
North America’s onshoring boom isn’t limited to Seattle either. Among the top 20 service providers, the percentage of new onshore centers rose to 52 percent versus offshore service delivery locations over the last 18 months, according to an earlier Everest Group study. Large companies such as Dell, IBM and Walmart have opened new onshore centers in the past year and a half.
Predictions for 2017
This year will bring significant change to the global services market, including technology-driven disruptions that will drive service delivery models to meet the changing expectations of enterprises.
One major shift includes a do-it-yourself movement among organizations that are showing a greater preference for in-house delivery systems. Another is that the global outsourcing market growth rate will continue to decline over the next 12 to 24 months, according to an Everest Group press release.
They also report that outsourcing growth declined in each successive quarter of 2016, predicting that the growth rate will continue to fall to as low as 1.9 percent through 2019.