Clients Firmly focused on Efficiency/Optimization, Not Just Cost Cuts. Interest in Analytics and Talent Access Rising with Economic Outlook.
IT/BPO Service Providers: Outsourcing Advisor KPMG's Quarterly "Pulse Survey" Call Notes. Many themes are similar to last quarter, although "analytics" and "talent access" are now more important. Cost reduction remains the primary objective, but focus increasingly on efficiency/optimization than just slashing/offshoring jobs. Otherwise, outsourcing maturing, especially for commoditized services and for U.S. clients. Pipeline tone incrementally positive reflecting the improved global (x-emerging markets) economic outlook, more sophisticated buyers, and shorter duration contracts. After years of under-investing in people (especially with new tech skills), enterprises are now more worried about access to "talent." This should favor service providers in general and U.S.-centric IT staffing provider On Assignment (ASGN), in particular.
Client Continues to Get Smarter.During the Great Recession, and before, the focus was primarily on aggressive cost cutting often through the transfer of work to lower-cost offshore locations. Now the sourcing manager is leveraging several options: offshoring, domestic sourcing, shared services, supplemental staffing and internal improvement efforts. Deployment of technology, including cloud-based solutions, is a key enabler. But, it was noted that many cloud solutions are still being customized suggesting continued work for the consultants/integrators. In addition, solutions are becoming multi-tower and therefore more vertical. We continue to believe providers that have not invested in "vertical" industry knowledge could be increasingly pressured.
Improving Macro, Adoption of New Technologies Drive Leveraging of Analytics.These were the biggest changes we heard from the Q3 call, as clients now seek to leverage their digital "big data" into useful business intelligence. This includes conversion of legacy systems to put data in useable format. Note recent new offerings by Accenture (ACN) and Computer Sciences (CSC).