Nearshore Blog

Clinton Global Initiative Latin America

Image by Center for American Progress.

The first Latin American Clinton Global Initiative will be held in Rio de Janeiro December 8-10, 2013. Following the great success of CGI Asia in 2008, the board of directors of CGI decided 2013 was an ideal time to focus the attention of the world on the unfolding success story of Latin America.  Former President Clinton made the announcement in New York City, at the May 6th mid-year meeting of CGI.

The Clinton Global Initiative was founded in 2005, and convenes leaders from around the world to develop innovative solutions to the most pressing challenges we face today.  CGI helps organizations from the private sector and public sector by fostering partnerships, providing strategic advice and driving resources toward effective ideas.

Although Latin American regional economic growth has slowed down over the last couple of years, economists expect the worm to turn by 2014. Nearly all project the region to rebound strongly, especially if Latin American nations continue to increase investment in infrastructure and continue inching down the path of free market economic reform.  CGI Latin America gives regional leaders an opportunity to work together on impact sourcing and other low-income initiatives make sure that economic and social development occur hand in hand.

Global Economic Slowdown Threatens Latin American Growth

Global economic growth is slowing to a trickle in 2013. The Economist recently revised its Eurozone economic growth projections from a tepid .4% to a depressing  -.7%, and also revised China's annual projected 2013 economic growth from 8.4% to 8%. U.S. 2013 growth is also being revised downward, with the International Monetary Fund retrenching projections from a relatively weak 2.1% annual growth rate to an anemic 1.9% growth rate. The IMF also recently reduced its global economic growth projections for 2013 from 3.5% to 3.3% percent.

The Three Types of Outsourcing Relationships

While no two outsourcing relationships are alike, some broad generalities can be drawn about different types of common relationships. For example, HfS Research identifies three main types of outsourcing relationships in its recent white paper, “The Great Talent Paradox in Outsourcing.”

As the type of outsourcing relationship you have plays a crucial role in determining how much (or little) value it will deliver, it is worth reviewing these three categories. Which one best describes your own outsourcing relationship, and are you satisfied with the result?

‘Lights On’ Outsourcing
As defined by HfS Research, a “lights on” outsourcing relationship is marked by a buyer seeking to simply drive out cost without incurring any “disasters.” As the buyer sees little to no strategic value in outsourcing, they see no need to pay for high-level talent or expertise. The “lights on” buyer is satisfied with basic execution of outsourced processes at a cheaper cost and governance typically consists of enforcing SLAs and otherwise meeting essential goals.

2012 – A Year of Disaster for IT Services

According to urban legend, 2012 was supposed to have been a year of apocalyptic disaster due to the ancient Mayan calendar ending on Dec. 21 of last year. Of course Dec. 21 came and went with nothing more than bad weather in the Northeast and life continued as always.

But perhaps the ancient Mayans were really looking ahead to the performance of the global IT services market. According to new analysis from research firm Ovum, 2012 could be considered a year of disaster from the standpoint of IT services providers. Aided by especially poor fourth quarter performance, annual IT services contract activity during 2012 fell to its lowest level since 2002 in terms of total contract value (TCV) and deal volume.

Global IT Services Market to Grow 3.5% in 2013

The global ITO market is set to grow 3.5% in 2013, according to recent projections from HfS Research. While ITO performance in the Europe, Middle East Asia (EMEA) market is expected to continue to be poor this year, HfS expects recovering growth in North America as well as increased demand for IT infrastructure services in non-traditional markets to compensate.

Total market size for the global ITO industry is expected to reach $648 billion this year, with professional services representing $309 billion of the total. Application development and maintenance (ADM) outsourcing will represent another $70 billion, while IT infrastructure management will drive $143 billion in 2013 revenue.

South America Progresses as Outsourcing Destination

South America is one of three emerging outsourcing regions, along with Southeast Asia and Eastern Europe, cited as having “progressed significantly” in the 2013 Top 100 Outsourcing Destinations report from global business advisory services provider Tholons. Interestingly, South American countries were among both the biggest gainers and losers in Tholons’ rankings this year, which the report attributed to improving traction in some nations in the region while “lingering adverse risk conditions” continue to impair outsourcing growth in others.

Let’s drill down and look at what Tholons had to say about the current state of outsourcing in several key South American nations.

Colombia on the Rise
Colombia is a rising power in the outsourcing market, with two cities – Bogota (49th) and Medellin (53rd) among the fastest movers on the top 100 cities list. Tholons credits “unwavering support” from local industry and government to promote Colombia as a viable global ITO and BPO destination, as well as collaboration between Colombian service providers and large Western companies to set up operations there, as helping fuel Colombia’s outsourcing growth.

Reducing Operating Costs and Smart Initiatives Top 2013 Business Trends

While the long-running recession and the accompanying economic uncertainty has led both outsourcing firms and their clients to continue to prioritize reducing operating costs in 2013, this trend is not a stampede. Providers are working to keep costs down and keep profits up, but not stunt future potential. Businesses are carefully analyzing how to efficiently streamline their current operations, and thoughtfully selecting "smart initiatives" that will lead to greater productivity rather than unreflectively  jumping on the sourcing bandwagon de jour.

According to KPMG Sourcing Advisory 4Q 2012 Pulse Survey, continuing to drive down costs was the number one organizational initiative for 92% of service providers. For businesses, the top priority was improving and expanding on their current sourcing arrangements rather than looking at new investments.  These trends dovetail  to create increased demand in the areas of shared services and specialized outsourcing, but likely augur a decrease in traditional outsourcing.

Single Source IT Contracts Come Back into Vogue in 2013

The trend of the last few years toward the use of multiple outsourcing suppliers in the IT industry is growing long in the tooth, and the pendulum has begun a strong swing back toward single-source IT contracts in 2013, at least according to the IT analysts at Ovum.  They contend that businesses have not seen the expected synergies from multi-sourcing, largely due to the difficulties of internal project management control leading to scope creep and increased costs.

Ovum's recently released report "2013 Trends to Watch: Bundled Outsourcing" points out that international outsourcing contract lengths are gradually lengthening as well, with the average contract topping four years for the first time. The length of  the average outsourcing contract in the insurance industry is up to almost seven years. The report also mentions that outsourcing contract sizes are increasing, with contracts averaging over $72 million in the fourth quarter of 2012.

Does the Java scare got you thinking about your security?

Interestingly enough, these last five days have given the Application Security arena a run for its money, with the attention around the zero-day flaw in Java 7. It seemed to be a vulnerability that allowed a remote, unauthenticated attacker to execute arbitrary code in a vulnerable system, which could be attributed to the fact that the default Java security level setting was set to ‘Medium,’ enabling the attacker to run code without prompting the user before any unsigned Java applet or Java Web Start application was run. (You can read more about the alert here.) The vulnerability ended up being so serious that on Friday the Department of Homeland Security warned users to disable Java software completely, while Apple actually disabled it remotely on its machines that had the program installed.

Preventing IT Fraud in 2013

Perception of the risk posed by global business fraud may be on the wane, but actual risk remains widespread, according to results of the Annual Global Fraud Survey from business security consulting firm Kroll Advisory Solutions. Companies engaging in outsourcing, particularly outsourcing involving offshore providers and/or IT, should pay attention to the findings of the survey of 839 global business executives.

Survey results actually show some decline in the occurrence of global business fraud during 2012, with 61% of respondents reporting being victimized by fraud during the year, down from 75% in 2011. However, more than one in five (21%) respondents reported data theft during 2012, and fraud is still a constant danger. Let’s look at a few specific areas that should interest companies involved in ITO.