neoIT, Goldman Sachs find globalization should increase despite economic conditions

April 11, 2008

Corporate investment for both information technology and business process services is expected to continue across nearly all market segments and economic conditions. Executives indicated that the reallocation of internal spending toward global services will continue for applications and increasingly include infrastructure management and business processing services.

"Clients continue to look for cost savings. These savings come from a combination of labor arbitrage and efficiency improvements," said neoIT CEO Eugene Kublanov. "Organizations that fail to keep up with change will increasingly fall behind their competitors. Many industries will undergo fundamental changes to cost structures in the next few years by leveraging globalization."

The report, The Global Services Confidence Index: Key Industry Observations, provides timely insights into the strategies that companies are deploying to not only navigate through economic challenges, but also to establish strategic advantages while emerging from a downturn. Together with Goldman Sachs, neoIT launched the Index to gauge adoption patterns for globalization.

The report demonstrates that spending toward globalization is expected to increase, even if budgets are frozen or reduced. Globalization is viewed as a cost-reducing solution and experiences characteristics of counter-recessionary markets. Even when facing budget reductions, CXO expect to redistribute spending toward globalization -- and the expectation is consistent for information technology and business processes.

Trends

Budgets have not been cut, but CXOs are not confident in the status quo
Spending for all services is expected be increasingly redistributed to global solutions
CXOs plan to focus energy on contract renegotiation service provider consolidation
Latin America is the location most frequently being considered for future investment

"Companies are focusing on the value from current agreements and consolidating providers to standardize contract terms and pricing," Kublanov said. "The redistribution of services will continue as both current spending and future programs look globally. Service providers should continue to experience strong demand, although an excess of suppliers will drive market consolidation."

Source: www.neoit.com