Beyond Outsourcing, Lessons Learned from the Front Lines. Neoris Practical InSights Claudio Muruzabal Neoris CEO The change resides in the fact that low cost delivery through labor arbitrage is now a feature that should be built into any offering.

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“The vendor’s ability to understand the
dynamics of the client’s environment,
coupled with the ability to adjust to client
needs and request is becoming a key
differentiator in an industry whose players
are increasingly similar.”
For the last few years, the IT services industry evolved towards the establishment
of service models based on delivery advantages derived from labor cost arbitrage in
certain geographic locations. This concept was introduced by providers that set up
outsourcing centers in India during the Y2K rush and it rapidly became the prevailing
trend in the new millennium.
In recent times, a number of “closer to home” models were introduced with nearshore
providers from Latin America becoming key contenders in the IT services industry.
While Latin America emerged as a key destination for U.S.-based businesses
looking for improvements in productivity for their IT centers, Eastern Europe was
the prevailing destination for Western European counterparts. Destinations in
Asia - such as the Phillippines and more recently China-- also began to gain
significant traction.
Neoris CEO

2. “The change resides in the fact that low cost delivery
through labor arbitrage is now a feature that should be
built into any offering.”
‘Practical InSights’ is a Neoris publication. This material shall not be reproduced or
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company specialized in value-added consulting, emerging technologies and outsourcing solutions.
Headquartered in Miami, Fl. Neoris has operations in the U.S., Europe, Latin America, Africa, and
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However, a new pattern is emerging in the
way that large companies -with significant
outsourcing challenges to overcome and
pain points to manage- are looking at the
IT services providers. Low cost delivery is
no longer the key differentiating factor; it
is a given.
Vendors are expected to utilize the most
efficient model to deliver their services.
Labor arbitrage in services rendering is
no longer a defining factor for the more
advanced buyers in the market.
The vendor’s ability to understand the
dynamics of the client’s environment,
aptitude to adjust to client needs and
requests is becoming a key differentiator
in an industry with every increasing players
vying for the same opportunities.
Value in this space is now determined
by the true business understanding
that the IT services vendor brings to
the table. Large enterprise CIOs expect
world-class service in alignment with
estab¬lished industry standards across
different platforms and geographies.
This is vital if you want to be in the IT
services business. In addition to near
zero defects in service delivery, clients
are now focused on the domain exper-tise
offered by the provider, ranging from
specific technical proficiency to proven
knowledge of the clients’ industry and
functional models.
This is not different from what sophisticated
CIOs demanded from the traditional IT
services firms just ten years ago. The
change resides in the fact that low cost
delivery through labor arbitrage is now a
feature that should be built into any
offering. With this change, the lines
between traditional IT services providers,
offshore outsourcing providers and near-shore
vendors have blurred.
While capabilities among the three groups
converge, decision criteria become more
complex for IT management.
In a world where vendor service excellence
and domain expertise is at parity, and
price/performance is consistent due to
comprehensive use of lower cost delivery
mechanisms by all players, vendors must
focus on building additional sources of
distinction. In this context, I am convinced that
client-vendor relationship as a defining factor
for success is gaining even more ground.
The vendor’s ability to understand the
dynamics of the client’s environment,
coupled with the ability to adjust to client
needs and requests is becoming a key
differentiator in an industry whose players
are increasingly similar.
The vendors who offer these differentiators
will be the big winners. In other words, as
we embark on a new era in the IT industry,
salesmanship and personalized service
will once again make the difference.
In this new era, the prevailing decisive
factors that provide the best value to
nearshore clients are:
1 Offering the most flexibility.
2 Having the innate capability to
build trust with IT management.
3 Have the ability to understand
the client’s more subtle inner
workings.