The deployment of services delivered from regions with lower labor costs ("global delivery") has become a common practice in the IT services market. Pierre Audoin Consultants (PAC) highlights the opportunities and challenges of such global deliveries for the German players and market.
In most cases, parts of the IT services are shifted to countries like India, Poland or Mexico in order to save costs. But it additionally allows a higher level of flexibility regarding the availability and scalability of services. In recent years, companies also aim to gain access to specialist skills--which are increasingly scarce in Western countries and which have been built in low-cost locations over the past decade or so. This particularly concerns SAP skills, which have, for example, been built to a comprehensive level in India. Today, support activities such as installing patches, maintenance work, or preparation and follow-up activities related to release changes are already delivered efficiently from low-cost countries.
And it is not only Indian IT services providers such as TCS or Infosys that offer low-cost delivery resources. Western providers have also been aggressively expanding their global delivery capabilities. In fact, the world's 50 largest IT services providers today have about 32 percent of their employees based in low-cost locations, while in 2005, this share stood at only 20 percent.
Companies in Germany, however, often still take a critical view of the global delivery model. The share of service delivery through globally distributed resources remains significantly lower here than in the USA or the UK, for example.
Besides language barriers, German companies' reluctance is mainly due to reservations about the quality, security and transparency of service delivery. For this reason, it is essential for IT services providers operating in Germany to adapt their global delivery capabilities to the specific requirements of large German enterprises, the main users of global delivery.
Glocal: Global delivery with local proximity
Most importantly, this requires a globally well-balanced network allowing service providers to support clients' international business activities and guarantee "follow-the-sun" service coverage. This means, for example, a significant number of delivery personnel in India, where experience and capabilities are high and a large resource pool exists. At the same time, however, there is a need for...