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NASSCOM ILF 2014: Trends in Offshoring and Nearshoring: Ulrich Bäumer, Osborne Clarke


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NASSCOM ILF 2014: Trends in Offshoring and Nearshoring: Ulrich Bäumer, Osborne Clarke

  1. 1. NILF 2014 - Trends in Offshoring and Nearshoring Ulrich Bäumer, LL.M. Mumbai 12 February 2014
  2. 2. I. Introduction
  3. 3. 1. IT worldwide Forecast: The worldwide expenditures on IT will increase by 3.1 % in 2014 reaching 3.8 trillion USD. According to forecasts, the worldwide expenditures on IT will be 4.2 trillion USD in 2017. - Dach region 2010: 50 billion EUR - DACH region 2015: 60 billion EUR (Source: Gartner, Dezember 2013; Lünendonk study 2010) 3
  4. 4. 2. IT Outsourcing in Germany (Source: CIO Lünendonk-Studie 2010 - Mittelstand sorgt für Outsourcing-Boom) 4
  5. 5. 3. Market development (Outsourcing) in Germany 5
  6. 6. II. Change analysis
  7. 7. 2nd Generation Outsourcing • Companies used to be interested in: – Reducing costs (main objective) – Greater flexibility / better quality / innovation • Outsourcing contracts are long-term – many contracts concluded during the first wave are just about to expire • Companies have to decide how to proceed • Decision depends on the companies' current objectives 7
  8. 8. 2nd Generation Outsourcing • The companies' 1st Generation Outsourcing objectives are different from their 2nd Generation Outsourcing objectives: – Increased performance – Service Level adjustments – Improved quality • Reducing the costs in no longer the main driver for 2nd Generation Outsourcing • From single vendor to multi vendor – the dawn of the System Integrator 8
  9. 9. 2nd Generation Outsourcing – Life circle Request for Proposal (RfP) Due Diligence Due Diligence Final negotiations Phase 1 Phase 3 Phase 5 Phase 7 Comprehensive Phase 2 Phase 4 Phase 6 Phase 8 Pre-contract negotiations Signing of precontract Altvertrag termination Conclusion of contract (incumbent is possible) 9
  10. 10. III. Pro/Con consideration Offshoring / Nearshoring
  11. 11. Pro/Con consideration - Offshoring Pro Con • New cooperation possibilities • Loss of control • Offshore IT provider under pressure (growth rate and success story need to be continued) • Loss of know how • Language barriers • Cultural differences • Data protection / data safety • German employees are being displaced • • Cost reduction: Hourly rate of an Indian IT specialist very low Many qualified employees / no shortage of qualified employees 11
  12. 12. India, China, Eastern Europe: What's the trend? Eastern Europe: • Bulgaria, Estonia, Latvia and Lithuania already overtook the old centres in the Czech Republic and Hungary • Eastern Europe is a popular destination for outsourcing as European Law (e.g. data protection) applies and the staff speaks several European languages (German, French, etc.) • But: Eastern Europe still ranks behind the outsourcing strongholds such as India, China, the Philippines, Malaysia, Brasil and Mexico. 12
  13. 13. India, China, Eastern Europe: What's the trend? India The Philippines • Preffered for "Offshoring" • Strength lies in Call Center, BPO • Higher costs in comparison to China • Advantage: English is official language; • In 2013 the IT-BPO revenues amounted to 100 billion USD • Availability of excellent workforce to service the western needs culturally perceived as similar to the Western World • IT service exports have potential for growth; the industry, however, still is in its early days 13
  14. 14. Indien, China, Osteuropa: Was ist der Trend? China Eastern Europe / Russia • Strenghts lies in hardware • Expansion of IT and BPO service • Disadvantages: weak development of the IT infrastructure, Englisch • Lower number of IT specialists portfolio • Geographic proximity to Europe • IT provider landscape is inconsistent, not only in view of the number but also in view of the quality • Russia's technical structure is unstable 14
  15. 15. Questions?
  16. 16. Contact Ulrich Bäumer, LL.M. Partner/Rechtsanwalt +49 221 5108 4168 +49 221 5108 4169 16