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"Labour arbitrage won't count anymore," Euan Davis warned. He said CIOs would no longer simply base their outsource decision on labour costs. "Businesses will have an insatiable desire to optimise processes and reduce [operational] costs," he said.
Forrester Research predicted that, by 2015, most outsourcing contacts would be based on higher-level services such as managed services and business process, rather than on man-hours of programming. Davis said CIOs would need to support this shift in outsourcing by making sure their businesses established strong governance processes and change-management procedures. He told CIOs the teams managing their outsourcing contracts must be well versed in supplier-relationship management. He also urged IT directors to ensure their businesses had strong project and programme-management skills.
Forrester Research has found India is suffering an IT skills crisis and the staff attrition rate is running as high as 50% in some Indian offshore operations. Davis said Indian outsourcing providers would move up the value-chain to provide greater business expertise to companies in the long term.