While IT outsourcing is now anestablished management practicethe landscape continues to changein surprising ways. DiamondCluster’s2005 Global IT Outsourcing Studyreveals that buyers in growing numbersare: dissatisfied with offshore serviceproviders, prematurely terminatingcontracts and struggling to harvestthe full value of their outsourcingrelationships. While India and the USare still the top locations for out-sourcing services, interest in Chinais growing, which is bound to putdownward pressure on rates. Butwhile this evidence of a maturingmarket suggests challenges for outsourcing providers, the newsappears better for the IT staffs at US companies. While senior executivesstill view outsourcing as a cost-cut-ting opportunity, they also recognizeoutsourcing’s value as a means tomanage variable demand from therest of the business and to redeployin-house IT personnel for more crucial purposes.

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Spring 2005

Tom Weakland, Managing Partner – Global Sourcing Practice, DiamondCluster International, Inc.312.255.5579 tom.weakland@diamondcluster.com

To order additional copies of the DiamondCluster 2005 Global IT Outsourcing Study send an e-mail to: outsourcingreport@diamondcluster.com.

DiamondCluster’s third global IT outsourcing study polled hundreds of senior executives from buyer and provider organizations for theiropinions concerning various IT out-sourcing topics. The results of thisstudy are interesting, informative andat times frightful. Again this year thestudy focused primarily on outsourcingstrategy, provider selection processesand trends, outsourcing managementand lessons learned. We also studiedtrends in the industry over the past12 months in the areas of spending,buyer satisfaction, outsourcing impactand leadership of the changing out-sourcing market.

This research is intended to help organizations understand the latesttrends in IT outsourcing, leverageexperiences from respected executives that operate at the core of outsourcing initiatives, formulatetheir own set of best practices and to gain new insights into the prerequisites for successful out-sourcing initiatives.

2005 Global IT Outsourcing Study

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Profile of the ParticipantsDiamondCluster’s 2005 Global IT Outsourcing Study includes the insights of 210 buyers and 242 providers of outsourcing services. All of the participants are either directlyinvolved or highly aware of their company’s outsourcing-related decisions.

The number of total employees in the participating companies ranged from 100 to morethan 50,000. The number of IT employees on staff ranged from less than 100 to more than50,000. IT budgets of participating companies ranged from less than $5 million to morethan $500 million. Buyers participating in the survey conduct business in the financialservices, professional services, insurance, consumer products, retail, telecommunicationsand public sectors.

The providers participating in the study range in size from less than 100 to more than 10,000employees. Many of the outsourcing providers had operations in multiple locations, includingBrazil, Canada, China, Egypt, France, Germany, Hungary, India, Malaysia, the Netherlands,Romania, Russia, Spain, Ukraine, the United Kingdom, the United States, and Vietnam.

About DiamondClusterDiamondCluster International (Nasdaq: DTPI)is a premier global management consultingfirm that helps leading organizations developand implement growth strategies, improveoperations and capitalize on technology.Mobilizing multidisciplinary teams from our highly skilled strategy, technology and operations professionals worldwide,DiamondCluster works collaboratively withclients, unleashing the power within theirown organizations to achieve sustainablebusiness advantage. DiamondCluster isheadquartered in Chicago, with officesacross Europe, the Middle East and Latin America.

To learn more visit www.diamondcluster.com.

Outsourcing An Industry at a Crossroads

Virtually all of the buyers of outsourcing services in the latest study have outsourcedat least some of their IT functions. This is upfrom 80 percent a year ago, reflecting thecontinued growth in the outsourcing market.Additionally, 74 percent of buyers expect theiruse of IT outsourcing to continue to increasein the coming year (up from 64 percent in 2004).However, it is also important to note that sevenpercent of buyers told us that they were goingto decrease their use of onshore outsourcingand five percent said they would do the samefor offshore outsourcing. These are the firstdeclines we’ve heard of; no one told us thatthey were planning to decrease their level ofoutsourcing in previous years.

Most buyers are now several years into atleast one outsourcing relationship but despitethis, we have found that many buyers still donot have effective metrics and measures inplace to gauge the success of their outsourcinginitiatives. As one IT Executive told us, “If youcannot measure it, how can you know if youare satisfied?” Providers say that one of theirgreatest concerns is meeting unrealisticand/or immeasurable buyer expectations.This is especially true in the world of offshoreoutsourcing where buyer satisfaction rateshave plummeted from 79 percent in 2004 to 62 percent today.

This dichotomy reveals that the IT outsourcingmarketplace has reached a crossroads. Onone hand, buyers say they are feeling morecomfortable that the basic value proposition –quality service at a lower cost – is attainable.On the other, the number of buyers that haveabnormally terminated an outsourcing relationship in the past twelve months hasmore than doubled to 51 percent today versus 21 percent a year ago.

Among other key findings in DiamondCluster’s2005 Global IT Outsourcing Study:

• The threat of employee backlash is still amajor concern among buyers (88 percent)and providers (86 percent) but worries aboutU.S.anti-outsourcing legislation and politicalpressure have fallen significantly since themost recent presidential election.

• Forty percent of buyers expect to outsourcesome IT functions to China over the nextthree to five years, versus eight percent whowere making those plans only a year ago.

• Buyers remain skeptical about outsourcingmission-critical services. The greatestdemand will be for application maintenanceand support.

EXECUTIVESUMMARY

Research ScopeDiamondCluster International conducted itsthird in-depth study of the IT outsourcingindustry to gain additional understanding ofthe perspectives of both outsourcing buyersand providers. The study focused on out-sourcing spending and adoption patterns;buyer satisfaction; outsourcing risks; strategyand approach; management practices; theprovider selection process; and trends withinthe community of outsourcing providers. Bycomparing and contrasting findings from previous years we are able to track the evolution of this maturing industry.

The universe of respondents we surveyed in late 2004 and early 2005 provides a representative overview of opinions on key IT outsourcing issues from the executives who know them best: actual buyers and providers of IT outsourcing services.

Our quantitative research methodologyincluded a comprehensive survey of keydecision makers (“buyers”), principally in large U.S. companies across multipleindustries. In addition, we surveyed seniorexecutives (“providers”) at IT outsourcingservices firms based around the world.

What is Going On Behind The Numbers?

While their experience with outsourcing isgrowing, buyers still find it very difficult toexecute an optimal sourcing strategy. Buyersthat viewed outsourcing as a series of transactions over the last few years are now recognizing the unintended consequences ofnot having a sourcing strategy. When buildingsourcing relationships one transaction at atime, many organizations forget to assess theoverall impact on their training requirements,recruiting practices and career paths. It isonly later that they recognize the implicationsto these functions and have to scramble to fillthe inevitable gaps.

At the same time, providers of IT outsourcingservices have finally realized that it is not intheir best interest to differentiate on the basisof price. They are striving to build deepertechnical skills, even as the market for offshoretalent heats up and it becomes harder to attractand retain top employees. While rates appearto have stabilized they will start to increase inthe near term -- that is, until China enters themarket in a big way.

While this year marks the first decline in satisfaction with offshore outsourcers, sendingcommodity IT operations and processes offshore remains attractive. As the industrymatures, however, buyers need to becomemore rigorous in thinking about sourcingstrategically and in utilizing the appropriatemetrics to confirm that they are using theright resources for the right functions.

It is incumbent upon the CIO and senior ITmanagement to engage in sourcing discussionsat a strategic level. Buyers told us that atpresent their CEO, COO and CFO are lessengaged in outsourcing decisions than theyhave been in the past. While this represents a vote of confidence it may also be a missedopportunity. Outsourcing decisions shouldn’tbe made solely on the basis of cost savings.They should be part of a larger debate abouthow IT can enable the enterprise to meet itsgrowth and profit objectives.

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How are buyers and providers feeling aboutthe future? Will spending and adoption ratescontinue to increase, level off or perhapseven decline?

Use of Outsourcing is Growing but so are Questions about Value

Buyers of outsourcing services generally expectto increase their use of IT outsourcing in thecoming year. Seventy-four percent of studyparticipants (64 percent in 2004) plan to increasetheir level of IT outsourcing in the next 12months. While this is an increase from last year,it is also important to note that seven percentof participants told us that they were going todecrease their use of onshore outsourcingand five percent said they would do the samefor offshore outsourcing. These declines areimportant to note in that last year no one told usthat they were planning to decrease their levelof outsourcing. This data, coupled with thequalitative insights we gathered from in-depthdiscussions with buyers, points to rising concernamong buyers that they are not getting thevalue or performance improvements theyexpected from their outsourcing relationships.We expect buyers to become more results-focused over time, but in the interim we predict some outsourcing arrangements will not be extended once they reach theircontractual termination points.

Further evidence of the heightened challengesfacing offshore providers was found when we asked buyers about their plans to moveoperations offshore. Seventy percent of buyerparticipants told us that they were going toincrease their use of offshore outsourcing

OUTSOURCINGSPENDING & ADOPTION

over the next 12 months. This represents asignificant decline from 86 percent a year ago,but is still a substantial increase over the 32percent in 2002.

We believe that the reduction in offshore outsourcing growth rate projections is largelya result of two factors. First, more companiesare realizing that the cost benefits of offshoreoutsourcing are not always worth the effortwhen compared to the costs of equivalentonshore (or near shore) outsourcing. This iswhy developing a sound sourcing strategywith a comprehensive cost-benefit analysis isimperative to long-term success. The secondfactor is that buyers have already outsourcedmany of the more commoditized IT functionsthat have been the traditional mainstays of theoffshore movement. The focus is now shiftingtowards more specialized services such as datacenter operations and real-time productionsupport. Buyers historically have not viewedthese types of services as conducive to offshoreoutsourcing. Providers of offshore outsourcingservices, however, recognize this and areworking quickly to overcome these barriers ofperception. Whether they can be successfulor not remains to be seen.

Providers Less Optimistic AboutOffshoring Growth

When we asked providers of IT outsourcingservices for their thoughts on buyer spendingtrends for the coming year, they were slightlymore upbeat than the buyers, but significantlyless optimistic than they were a year ago.Overall, 81 percent of providers expect buyersto spend more on outsourcing than they havein the past (this is down from 90 percent a yearago and from 100 percent in 2002). When itcomes to offshore outsourcing, 83 percent ofproviders expect buyer spending to increaseover the coming year. This represents a significant decline from 97 percent in 2004. It appears that providers are more cautious in their current outlook and recognize that the growth rates for outsourcing must slowdown over time.

Interestingly, while 11 percent of providerstold us that they expect a decrease in spendingfor onshore outsourcing, none of them expectany decrease at all in offshore outsourcing. Inthe mind of providers, offshore outsourcingstill represents the area of most significantgrowth opportunity.

“Nothing is sacred; however, it is obviousthat there are some things where closeness to the business matters or skill sets aren't readily available that you need to focus on in-house.”

– Managing Director, Financial Services

The last 10 years have seen tremendous changein the outsourcing landscape. On the providerside, new firms in offshore locations haveemerged as leaders, while traditional IT servicesfirms have had to scramble to catch up bybuilding lower cost delivery and support centers.We asked buyers of outsourcing services inwhich year they first began outsourcing ITfunctions. Only 20 percent had outsourced anyIT functions prior to 1996. Between 1996 and2000, however, that number had grown to over55 percent and today sits at virtually 100 percent.

Buyer satisfaction with IT outsourcingendeavors overall has risen slightly sinceDiamondCluster’s 2004 study. A year ago, 74percent of study participants indicated thatthey were satisfied with the results of theiroutsourcing efforts. Today, that number hasrisen to 78 percent; however, all is not goodfor the providers. While overall satisfactionmay have grown, so has overall dissatisfaction.Last year, 10 percent of survey participants weredissatisfied with their outsourcing endeavors(down from 23 percent in 2002). This year 15percent are dissatisfied with at least some oftheir outsourcing efforts. Interestingly, no buyersindicated dissatisfaction with both their onshoreand offshore relationships.

BUYERSATISFACTION

Offshore Satisfaction is Declining

When considering buyer satisfaction, the picture for offshore providers is not very pretty.A significant change from prior studies is thatbuyers are no longer more satisfied with theservices of their offshore outsourcing providersthan with onshore providers. In 2004, 74 percentof study participants were satisfied with theironshore outsourcing initiatives. Today, thatnumber has risen to 81 percent. Offshore outsourcing satisfaction rates, however, havefallen significantly over the past year from 79percent to only 62 percent today.

We believe that there are several major contributing factors to the decline in offshoreoutsourcing satisfaction. These factors include:

• The explosion of offshore outsourcing has caused enormous job growth in manylocations, particularly in India. As a result,there is fierce competition for the bestresources. This has led to unexpectedly highemployee turnover rates, making it difficultfor many offshore outsourcing firms to keeptheir staffing commitments to their buyers.

• The huge demand for offshore resources hasalso caused tremendous growth in the numberof firms providing outsourcing services. Whilemost of these firms are of high-quality, it isinevitable that some are not. As differentiatingbetween offshore providers remains difficult, buyers risk selecting lesser quality firmsbased solely on price differential.

• As offshore firms continue expanding theirbreadth of capabilities, the work becomesmore complex and less commoditized. As aresult, many firms are learning about industryand business processes “on the job.” Thisleads to higher costs, more missed deadlinesand overall lower client satisfaction.

Despite the downturn in satisfaction with offshore outsourcing over the past year, weremain convinced that offshore outsourcing ishere to stay. As the industry matures, however,buyers need to become more rigorous inthinking about their sourcing strategies andutilizing metrics to confirm that they are usingthe right resources for the right functions.

Not surprisingly, when we asked providers theirthoughts on buyer satisfaction, they were muchmore bullish. Overall, providers thought thatboth their onshore and offshore customers weregenerally more satisfied than in previous years.

Measuring Benefits: ReallocatingResources Trumps Cost Savings

This year, we asked buyers to tell us about theactual benefits they have received through IToutsourcing and if those benefits are meetingtheir expectations.

As we suspected, cost savings was not themost frequently cited benefit. In fact, the re-allocation of internal resources to morecritical functions (83 percent of respondents)was the benefit buyers most often cited. Thissuggests that many organizations resist instituting internal headcount reductions as aresult of outsourcing. It is far less painful foran organization to reassign those redundantresources to other, often more strategic,activities while also avoiding the employeeturmoil and backlash associated with workforce reductions. In addition to reallocatingresources and cost savings, companies alsocited faster time to market, increasing share-holder value and avoiding the need to discontinue or reduce products or services as benefits of IT outsourcing.

In general, providers agreed with buyers on actual benefits realized, although theythought the occurrence of each benefit to besubstantially higher. For example, 95 percent of providers claimed that their buyers hadachieved cost-saving benefits.

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The art of managing customer expectations is important to any long-term business relationship but this is an area where providershave been found wanting. Only nine percentof buyers say that the benefits of outsourcinghave exceeded their expectations and only 37percent indicated that the benefits have metall of their expectations. Forty-eight percent ofbuyers said that their outsourcing relationshipshave met some of their expectations. On a morepositive note, not one buyer reported that noneof their expectations had been met.

Providers believe they are doing a much betterjob in meeting buyer expectations. Twenty-seven percent of providers told us that theyare exceeding buyer expectations and 52 percent said that they were meeting allexpectations. Only 19 percent said they werepartially meeting buyer expectations and, likethe buyers, none said that they had not metany expectations. In this area, the buyers andproviders agree. All outsourcing arrangementsappear to meet at least some expectations. Webelieve the high incidence of only partially metexpectations is largely due to four factors.

• Unrealistic or poorly defined expectationsestablished at the outset of the relationship

• Poorly defined metrics and measures for gauging benefits and success

• Provider deficiencies in delivering against expectations

• Buyer deficiencies in managing their providers

Simply put, it is a two-way street: buyers andproviders share the responsibility for notmeeting more expectations. However, ifproviders expect to deliver results that willengender mutually beneficial, long-termrelationships, more work needs to be done

to establish “win-win” arrangements andproactively manage expectations throughoutthe duration of the contract.

Abnormal Terminations on the Rise

Our 2004 study found that 21 percent of buyershad abnormally terminated an outsourcingrelationship in the prior 12 months. The mostcommon reasons for those terminations,according to buyers, were when providersface financial difficulties, fail in delivering oncommitments or when buyers consolidatetheir portfolios of outsourcing providers.

We found far different results this year. The percentage of buyers reporting that theyhave abnormally terminated a relationship inthe past 12 months more than doubled to 51percent. The primary reasons cited for theseterminations included:

• Poor provider performance (36 percent)

• Change in strategic direction (16 percent)

• Function moved in-house (11 percent)

• Cost savings not achieved (7 percent)

Another 13 percent of buyer respondentsreported that they had terminated a relationshipdue to the natural expiration of the contract. So,even though satisfaction rates have gone slightlyup, these findings suggest an undercurrent ofdissatisfaction and an inability among someoutsourcers to retain the long-term relationshipsthat are the lifeblood of their organizations.

When we asked providers about abnormallyterminated relationships, we were also surprised. Whereas in 2004 only seven percentof providers were willing to admit that they hadhad a contract abnormally terminated in the

past 12 months, this year the number has risento an astonishing 49 percent. The reasons forthese abnormal terminations did not match withbuyer perceptions.

According to providers the most frequent reasons included:

• Buyer went out of business or was no longer viable (20 percent)

• Buyer change in strategic direction (19 percent)

• Buyer moved function in-house (12 percent)

Poor provider performance, cost savings notattained and buyer breach of contract werecited in no more than 5 percent of the cases.

Who is to Blame?

We believe that the dramatic rise in abnormalterminations is due to several primary factors:

• The explosion in the number of outsourcingproviders between 2002 and 2004, coupledwith their difficulty in differentiation, resultedin many buyers establishing relationships withsub-par providers. As the industry consolidatesand the poor performers are weeded out, weexpect the number of abnormal terminationsdue to poor performance to decline once again.

• Providers need to continue to focus onunderstanding real buyer needs and expectations. The days of simple wage arbitrage are almost over. Providers need to understand complex industry processes,develop deep areas of technical expertise and most importantly establish a better pattern of exceeding buyer expectations.

• Buyers are still underestimating the complexity and overhead associated with successfully managing outsourcingrelationships. Buyers need to dedicate moretime and energy to monitoring and measuringperformance in order to identify and remediateissues before they escalate and jeopardizethe entire relationship.

• Many buyers still view outsourcing relationships as transactional rather thanstrategic. As more buyers begin to developcomprehensive sourcing strategies thatinclude views into internal and externalresource allocation, they will become more efficient in their use of outsourcing anddevelop more successful relationships.

As in the past, we believe that while it is true that some arrangements go bad solely as a result of provider or buyer failure, theroot cause is more likely to be a mix of short-comings on both sides of the arrangement.

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As the outsourcing market matures, new risksemerge. Buyers’ ability to handle both internaland external risks will go a long way in determining the success of their outsourcinginitiatives.

Major Risks: Complexity, Effectiveness, Quality

Buyers’ major concerns about outsourcingcontinue to evolve. In 2002, buyers were worriedabout the uncertainty of financial payback andwhether outsourcing was going to be a goodinvestment. Last year, concern shifted to thepotential reduction in operational effectivenessdue to the challenge of managing resourcesthat could be thousands of miles away. Today,most buyers feel that management complexityis the greatest risk, followed closely by reducedeffectiveness and lower quality. Concernsabout financial payback, the location of staffand information confidentiality remain lesserconcerns in the minds of buyers.

A particularly important finding this year is thatonce again buyers are concerned about thequality of work they are getting from their out-sourcing providers. We believe that concernis a result of several factors. In some casesthe issue is poor provider performance, but inmany cases it is a matter of buyers not settingthe right expectations and then measuringquality against those expectations.

We believe buyer concern about managementcomplexity is caused by two primary factors.

OUTSOURCINGRISKS

First, buyers are using more providers to meetspecific needs and to reduce the operationalrisk of having work concentrated in one location.Thus, buyers are being challenged by managinga multitude of provider relationships. Second,new laws and regulations have increased the need for more stringent governance overcompany operations, including outsourcedservices. These factors, along with the usualcomplexities of managing an outsourcing relationship, have finally driven buyers toacknowledge that their ability to manage relationships effectively is the most criticalelement to outsourcing success.

There are some significant gaps in perceptionbetween buyers and providers regarding theperceived risks of outsourcing today. Providersfind themselves having to provide buyers withmore supporting documentation and performmore frequent reviews relative to operationalprocesses and procedures. They realize thatbuyers are more concerned about issuesassociated with management complexity than about financial payback or informationconfidentiality. There are, however, areaswhere providers still do not fully appreciatehow their buyers feel about risk. Providersoverestimate buyers’ concerns aboutresource control and proximity, butsurprisingly underestimate how concernedtheir customers are about the impact ofreduced operational effectiveness and qualityof work. This is an area where providers need to focus in order to differentiate themselves from their competition and maintain long-term relationships.

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Backlash Concerns Remain but Focus Shifts

Buyers were questioned again this year about several specific factors influencingtheir outsourcing decisions. Fueled by thepresidential election and campaign rhetoric of 2004, buyers in the United States werewary about the potential for anti-outsourcinglegislation and political pressure against out-sourcing. While 85 percent of the buyers thenwere concerned about legislation and politics,that number has fallen sharply to about 50percent today. The threat of employee backlashover outsourcing initiatives, however, is still amajor concern of both buyers (88 percent) andproviders (86 percent).

Interestingly, buyers are not very worried aboutthe effects of competitor criticism or unionpressures on their outsourcing endeavors. Wefeel that this demonstrates that outsourcing hasbecome an integral part of today’s businessstrategy. As for a lack of concern about financialmarkets, strategies like outsourcing that succeed in reducing costs, increasing efficiencies and expanding market presenceare typically received positively.

Buyers are, however, worried about employeeseverance costs, the reaction of their customersand about negative publicity in general. Wefind buyers who are proactive about developingand executing communications plans targetedto internal employees and their customersexperience a smoother transition to outsourcing.

Outsourcing providers are well attuned to the sensitivity surrounding outsourcing relationships. They cited employee backlashas the factor most worrisome for buyers. As aresult, many limit their presence on client sitesto keep the “face of outsourcing” out of sightfrom company employees. They are also wellaware that employee severance costs, negativecustomer reactions, and negative publicity aresignificant buyer concerns. However, providersare under a false impression that most buyersremain threatened by anti-outsourcing legislation. This misconception is most likely due to offshore providers lacking fulltransparency into information in buyer markets.

Is the World Safer?

In light of ongoing geopolitical issues, weagain explored the impact that current worldevents are having on offshore outsourcingdecisions. Today, despite war, terrorism, and thecontinuing tensions in the Middle East, buyerassessments of global stability have generallyimproved. In 2004, 78 percent of buyers saidthat global stability concerns were impactingtheir outsourcing decisions. Today, that numberis down to 68 percent. As for providers, 65percent express concern today vs. 69 percentin 2004. We feel that these changing buyer andprovider opinions reveal that other concernsare taking precedence and that the largerworld conflicts are concentrated in regionsnot typically known for outsourcing.

As in years past, our study focused on identifying macro-level provider trends thatare impacting the outsourcing industry.Recognizing these trends and their potentialimpact will help buyers and providers alikeestablish and maintain more successful out-sourcing relationships.

Today’s IT outsourcing services landscape is more complex than ever. There are morecompanies providing more services in morelocations than ever before. We see companiesthat initially established themselves as low-cost providers in countries like India and thePhilippines now seeking to, in essence, “out-source” some of their own operations byestablishing operations in even lower costcountries. We also see new companies beingestablished in emerging locations, includingChina and Eastern Europe, as entrepreneursthere seek to capture a share of the enormousIT services global spend. (Global spending onIT services is expected to reach $585 billionaccording to estimates by the United NationsConference on Trade and Development.)

Merger and acquisition activity continues asoutsourcing providers seek to improve theirmarket positioning by adding specialized skills,expanding the breadth of their offerings andincreasing their location footprints. Providersare also establishing more offices in countrieswhere they have large concentrations of buyersin an effort to influence upstream decision-making and improve customer relations.

Expanding Breadth of Services

In last year’s study, we recommended thatproviders focus on developing deeper areas of specialization and enhanced industryexpertise to establish and maintain competitivedifferentiation and to protect established ratestructures. Apparently, the providers havebeen listening. They have invested in their

PROVIDERTRENDS

managed services capabilities, including specialized services such as PC Maintenanceand Support, Network Management, andDatabase Management. Along with thisexpansion they also are experiencingincreased demand from buyers for more traditional project services like applicationdevelopment and support.

As consolidation continues and as buyersbecome more savvy, providers must continuedifferentiating themselves with specializedservices and skills. Providers that don’t willfind themselves on the losing end of the commoditization chain as they watch theirmargins erode and their employees leave for more exciting opportunities.

“China will change its intellectual property laws and become more fluent in the English language. That country will become dominant.”

- Division Manager, Major Bank

Locations: China Gaining Momentum

The United States and India remain outsourcinghotspots. Approximately three-fourths of thebuyer participants in our study outsource someIT functions to one of these countries. Likewise,the majority of providers have operations inone or both of these countries. The big newsis China’s emergence as a location for out-sourcing services. In 2004 not a single buyerrespondent said that they were actively out-sourcing IT functions to China. Today, six percent of buyers say that they are in China.

When we asked both buyers and providerswhich countries they thought would be theleaders in providing IT outsourcing servicesover the next three to five years, the UnitedStates and India remained the most popularchoices, but there was significant interest inemerging markets, such as China, Mexico,Latin America and Eastern Europe. For example,in 2004, only eight percent of buyers expectedto establish outsourcing operations in Chinaover a three to five year period. Today, thisnumber has grown to 40 percent. Likewise,the growth rate projections for other locationshave grown at smaller, but still impressive rates.Countries that appear to have fallen out offavor as outsourcing locations this past yearinclude Israel and Russia.

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The most aggressive providers are workingdiligently to establish operations in multiplelocations. No longer are they taking a wait-and-see attitude in places like China andEastern Europe. Instead they are establishingoperations and working to grab market shareahead of their competition. Overall, providersexpect to see the majority of their business inIndia, the United States, China and EasternEurope over the next several years. When itcomes to identifying the locations where out-sourcing presence will not be as strong in thenext three to five years, providers, like buyers,identified Israel, but they also included Mexicoand the Philippines. Interestingly, many providersremain confident that Russia will continue tobe a strong and viable location for outsourcingin the future.

“Costs will rise until China enters in earnest.”

- Director, Server Network Strategy, Global Financial Services

Buyers Conflicted on Changes in Outsourcing Rates

We asked buyers and providers how the market rates they pay or charge for outsourcingservices have changed in the past 12 months.Although questions were asked separately foronshore services versus offshore services,the overall trends are similar.

Buyers this year offered conflicting viewpointswhen asked about overall onshore and offshorerates. The majority feels rates have remainedconsistent with 2004 levels. However, roughly25 percent believe overall rates have increasedand 22 percent believe they have declined. Webelieve that this dichotomy is a result of providersgetting much smarter about how they chargefor services and structure relationships.Providers have been working hard to removecost as a differentiator and it appears to beworking. In buyers’ search for specializedservices that meet their unique needs, theymust be willing to balance costs and value innegotiating pricing. Traditional industry pricingbenchmarks will be less reliable as an indicatorof what buyers might expect to pay, particularlyfor the emerging category of managed servicesthat outsourcers are offering.

Providers’ perspectives on onshore and offshorerates are similar. The majority of providersbelieve their rates have remained constant.More providers -- approximately 2 to 1 -- indicate an increase versus a decrease inrates. This shows an upward trend in ratesacross all services in comparison to last year.We feel that rising rates are predominantly areflection of increased buyer demand aroundthe globe as more companies utilize outsourcingas a strategic lever.

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STRATEGY ANDAPPROACH

Outsourcing Rationale

Over the last several years there has been agradual shift away from cost as the dominantdriver for outsourcing decisions. The search forcost-savings is still paramount but the buyersof outsourcing services have identified severalother compelling reasons for turning to out-sourcing providers, which is good news forinternal IT staffs.

While controlling or reducing costs is stillclearly top of mind for outsourcing decision-makers, two other factors -- better managingvariable capacity and freeing up internalresources for more critical purposes -- arequickly rising in importance. We believe thatthis shift is indicative of two major trends.First, buyers have learned that it is often difficultto attain significant cost savings through out-sourcing based on employee headcountreductions. This is partly due to strict employment laws in some parts of the world,but also because many organizations find itdifficult to terminate employees at the rapidrates that are originally projected in many out-sourcing business cases. As a result, moreorganizations are redeploying resources ratherthan reducing staff and tapping into pools oftalented but poorly leveraged internal resourcesthat they are now using more effectively.

The second major trend in outsourcing rationaleis in using outsourced resources to managefluctuating capacity needs. Sophisticated ITorganizations recognize that demand ebbs andflows, often times either leading or trailing

economic cycles, depending on the industry,function and issue. The more demand for ITresources fluctuates, the more important it isto have a qualified stable of resources that canbe drawn upon – without having the burden ofhaving too many employees on staff whentimes are tough. Providers that recognize thisneed are becoming very adept at structuringrelationships with provisions for “flex capacity”to meet the variable demands of their buyers.Likewise, buyers are gravitating to providersthat best understand their particular needs andwho can be flexible in structuring relationshipsthat reflect the ebb and flow of demand.

Providers continue to be well-aware of whatdrives buyers to outsource. They understandthat cost reduction is still a primary internalselling point buyers use to obtain approvaland funding for outsourcing initiatives. Yetproviders are also more optimistic than in previous years that buyers are outsourcing formore strategic reasons, such as access toworld-class skills and as a means to free upinternal resources for more strategic activities.

While buyer and provider views on outsourcing rationale are converging moreeach year, there are still two areas wherethey are not in sync. In general, providersunderestimate the importance to the buyer of meeting variable capacity needs and overestimate the desire among buyers to out-source highly complex or difficult-to-managefunctions. Buyers still appear most interestedin outsourcing commodity functions first andonly then start thinking about more difficultfunctions or processes.

“Outsourcing decisions have to be made case by case.”

- European CIO, Financial Services

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What Should be Outsourced?

While buyers are beginning to think morestrategically, this has yet to translate intochanging purchasing habits. When buyers wereasked to identify the areas that they expectedto start outsourcing or to increase their levelof outsourcing over the next 12 months theresponses were quite revealing. Applicationmaintenance and support has replaced application development at the top of the list.Web hosting has fallen to the bottom. In general,buyers are focusing their spending on morecommoditized and standardized services,while shying away from large investments inmanaged services. We believe this indicatesthat buyers remain uneasy with outsourcingmission critical services and applications.

Providers tell us their primary focus still lies in delivering application development,maintenance and support services. However,

they also hold high expectations for growth inthe managed services category, particularly in the areas of database management andnetwork management. This suggests thatproviders are investing in building their skillsand capacity in these areas. Subsequently,buyers will soon be able to take better advantage of these services but demandhas not reached critical mass – yet.

Who Are the Decision Makers?

CIOs and other IT leaders continue to call theshots when it comes to purchasing outsourcingservices. In past studies, buyers identified CIOs,Vice Presidents of IT, and IT Managers as thekey decision-makers in IT outsourcing decisions.This year is no exception; those three titles arestill taking on the largest roles in the decision-making process. Buyer respondents this yearreport that the CEO, COO and CFO are broughtinto the IT outsourcing process less frequentlyand with lower levels of interaction. The onemajor change that emerged from prior yearsis the increasing importance senior leveloperations executives are playing in outsourcingdecisions. This is refreshing news, affirmingthat senior management realizes that IT out-sourcing and business process outsourcingdecisions are closely aligned and should notbe made independently. IT executives shouldbe comfortable with this trend because it isevidence of greater alignment between IT and the rest of the business.

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Providers still tend to overestimate the importance of non-IT C-level executives, butthey are also are in lock-step with their buyersin understanding the increasing role of senioroperations executives.

“Choosing the right outsourcing partner is critical. Attaining operational efficiency takes quite a bit of time.”

- Executive Director, Financial Services

Shifting Philosophy of Outsourcing Relationships

Buyer attitudes continue to oscillate when it comes to their approach to the use of out-sourcing providers. In 2002, nearly one-thirdof buyers preferred to partner with a series ofniche providers to fit their specific needs. In2004, however, none of the buyers indicatedthat they preferred this approach. Today, thetrend seems to be reverting slightly backtowards provider specialization. Many buyersare more apt to select multiple providers thatuniquely meet their specific needs rather thanstructure contracts with a single provider todeliver a broader set of services. Almost 70percent of respondents this year said they wereunwilling to partner with a single provider thatcould cover all of their needs; that is up sevenpercent from last year. We believe that thisindicates the ongoing maturation of buyerpurchasing habits. Buyers are spending moretime upfront assessing their needs beforestarting the provider selection process. Thisincreasing buyer maturity, coupled with lessdifferentiation on the basis of cost, bodes wellfor high-quality, specialized outsourcers as theycompete with the larger scale service providers.

Outsourcing Deals: OwnershipStake Becomes More Appealing

When it comes to structuring outsourcingrelationships, buyers most often prefer partnering with independent providers (83percent) rather than structuring other types of arrangements that would give them someownership in the relationship. There is, however, a growing interest for alternativeapproaches that should not be discounted.For example, the number of buyers that havetaken on some ownership position in an outsourced relationship has grown to 34 percent from 17 percent in 2004. Ownershipcan take the form of a joint venture, fully-owned subsidiary, or build-operate-transfer(BOT) arrangement.

When buyers seek an ownership stake in anoutsourcing relationship, providers are morethan happy to oblige. Twenty-one percenthave helped develop a fully-owned subsidiary,39 percent have formed a joint venture with acustomer, and 30 percent have implemented aBOT arrangement. As providers look for moreways to generate revenue and spread risk, theyare more willing to form complex partnershipswith their buyers. We believe that joint venturesbetween buyers and providers will becomemore prevalent in the coming years. This will be especially true in the BPO market asearly adopters strive to establish processingcenters that they can leverage to sell services to other buyers.

PROVIDERSELECTION

With strategy and implementation plans inplace, buyers confront the challenge of findingthe best-suited providers for their outsourcingneeds. Navigating today’s cluttered providerlandscape is increasingly complicated, withmore and more providers emerging in morelocations throughout the world. Today’sproviders range in size from large, full-servicefirms that have tens of thousands of employeesand IT resources in major cities across the globeto small, niche companies providing services inone or a few locations. Outsourcing providersare even turning to secondary outsourcers toexpand their breadth of services. Each out-sourcing model – full-service, niche, and blended-- presents a different level of risk, expertise,and quality. With all these choices, how docompanies ensure they are making the rightdecision?

Tech Skills, Flexibility Among Key Buyer Selection Criteria

A key finding of this year’s research is that the set of criteria that drive provider selectiondecisions continues to change. In our 2002study, buyers focused on skill set, vendor size,contract flexibility, quality, and existing providerrelationships to make their decisions. Last yearbuyers were primarily looking for referencesand reputation, cost and breadth of skills. Cost,of course, remains a constant concern, buttoday’s buyers also are focused on technologyskills and operating model flexibility.

The most sophisticated buyers are developingrich portfolios of providers as they implementstrategic sourcing solutions that balance cost,risk and value. These buyers are very focusedon the technical skills of their providers as theywant to partner with someone that has theexact skill sets that they need. Increasinglyimportant is the provider’s willingness to beflexible in how they structure their operatingmodels. The renewed value placed on flexibilityin structuring operating models is a result ofbuyers wanting to be more nimble in the waythey use providers. Historically, getting twocompeting providers to work together or havingproviders accept risk/reward sharing provisionshas been difficult at best. Today, providers mustbe willing to partner with buyers in a widevariety of models and must show a willingnessto adapt over time as dictated by changingbuyer needs and business conditions.

With more competition among more providers,cost remains a major consideration in theselection process. This is being driven in partby the rise of outsourcers in new geographicalregions (China in particular), with different costfundamentals. So, while it may not be as muchof a buyer’s market as in the past, there arestill significant wage arbitrage opportunitiesto be found. Organizations may just have tolook a little harder or take on a little more riskto find them.

Last year, our study indicated that providerquality certifications had fallen in relativeimportance in the eyes of the buyer. Webelieved then, as we do now, that this was notan indicator of the devaluation of this attribute,

but rather the general lessening of providers’ability to differentiate themselves from oneanother along this dimension. In short, having a high level of quality certification is nowexpected of all providers. The differencebetween 2004 and today is that reputation andindustry expertise appear to be going the wayof quality certifications. They are still veryimportant to buyers, but they are not beingused to drive key selection decisions. Thesetraits are simply part of the cost of entry in avery competitive, rapidly consolidating market.

As in 2004, provider market position, size andlocation are at the bottom of the list of buyerselection criteria. We believe that this is onceagain indicative of buyer opinion that thereare quality providers of all shapes and sizesall over the world. As the outsourcing marketcontinues to mature, we believe that size andlocation will continue to rank comparatively lowin the eyes of buyers. We predict, however,that the market position of providers willincrease in value among buyers. This will happen as providers establish themselves asmarket leaders in various industry segments or technology disciplines.

How Providers Perceive Selection Criteria

In prior surveys we found striking disparities ofopinion between those criteria buyers thoughtwere important and providers’ perceptions ofwhat their customers valued. The fact thatthis gap appears to be closing is additionalevidence of a maturing outsourcing market.

Today, as in years past, providers rank costthe number one factor that they believe to bedriving buyer selection decisions. However,providers now also recognize that cost is onlyone of several very important factors thatdrive purchasing decisions.

If providers better understand their buyers’selection criteria, are providers better able todifferentiate themselves from their competition?It may never be easy for an outsourcer to distinguish itself from their competition, butthere does appear to be a shake-out underway.

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In 2002, providers told us that they distinguishedthemselves first by the quality of their work,next by industry expertise and third and fourthby their delivery and technical capabilities.Cost was a distant fifth on the list. Last year,however, cost skyrocketed to the top of thelist of perceived selection criteria on theheels of increased competition and providermisunderstanding of buyer priorities. The resultof this miscalculation was that providers kepttheir rates artificially low as they scrambledto win new business.

While providers still believe cost is the mostimportant of the buyer selection criteria, theydo not place it at the top of their differentiationlist. This year, providers told us that they differentiated first on their technical expertise,and next on their industry expertise and flexibility in structuring operating models. Cost is fourth on the list, just ahead of reputation. These priorities are aligned closely with buyer attitudes. It also representsa significant maturation in the mindset of out-sourcing providers and will quite possibly leadto increasing rate structures, since both sides

seem to agree that fewer buyer decisions willbe driven primarily on the basis of cost.

For many CIOs not a week goes by withoutseveral outsourcing providers trying to scheduleintroductory meetings. Are provider efforts todifferentiate themselves in a cluttered marketactually effective?

Buyers tell us this year that it is easier to differentiate between providers than it was inthe past. Last year buyers said that it was mostdifficult to differentiate between competingoffshore providers. In fact, 58 percent of buy-ers found this to be difficult or very difficult.Today, this percentage has declined to 50percent. While certainly not an improvementproviders will be satisfied with, it does indi-cate that outsourcers are making progress intheir marketing and branding efforts. Webelieve this shift represents a combination ofbuyers becoming better informed about theiroptions and also of providers having a betterunderstanding of how to differentiate them-selves from their competition. The only areawhere buyers say that it is slightly harder todifferentiate between providers is in select-ing among onshore services. If onshore firmsare losing their ability to differentiate them-selves it does not bode well for establishedproviders since cost becomes more of a driv-ing factor when buyers cannot differentiate byother means.

We also asked providers how difficult theythink it is to differentiate themselves fromtheir competitors. Not surprisingly, providersgenerally gave themselves high marks.However, this self-assurance doesn’t matchthe ongoing perception among many buyersthat both offshore and onshore firms are inlarge part undifferentiated. For the outsourcers,the message is clear: more differentiationneeds to be done. As for CIOs and other buyers:expect to continue getting a tremendous number of cold calls and direct mail for theforeseeable future.

Defining Service Level Agreements (SLAs): Balancing Risks and Rewards

Outsourcing contracts typically define a set ofservice level targets that must be achieved aspart of the delivery of the outsourced service.A growing practice is the use of an incentivestructure to reward or penalize providers basedon their performance against agreed uponSLAs. In 2004, 61 percent of buyers told usthat they used SLAs with reward or penaltyclauses. Today, that number has increased to75 percent.

With more buyers utilizing an incentive structure to influence provider performance,SLA management is becoming increasinglyimportant. This year, 73 percent of buyerrespondents indicated they were administeringpenalties, 27 percent were issuing rewards, and25 percent were doing both. The unbalancedemphasis on penalties may indicate that buyersare establishing adversarial relationships fromthe outset and are not giving their providersenough incentive to over-perform and exceedexpectations.

“Don't squeeze the provider too much during contract negotiations. Make sure SLAs are easy to measure and administer.”

- CIO, Consumer Goods

As a result, it is no surprise that providershave pushed back and prefer to structureSLAs that provide more balance between riskand reward. Fifty-six percent of providersinclude penalties, 44 percent include rewards,and 37 percent include both in typical out-sourcing deals. Providers are very willing toput revenue at risk, but increasingly are askingbuyers to do the same. Overall, buyers are stillkeeping providers on the defensive andincreasing the pressure for them to perform or endure financial losses. The unintendedconsequences of these actions could haveenormous effects on the success or failure ofan outsourcing relationship. The next severalyears will prove to be instrumental in achievingthe right mix of penalty and reward opportunitiesin successful outsourcing relationships.

Establishing Key Metrics

Buyers, in general, report that they are stillclosely monitoring their relationships throughmetrics reviews, site visits and qualitative relationship evaluations. These reviews aregood for evaluating the high-level health of an outsourcing relationship, but often fail tosurface issues directly related to the deliveryof a specific project or service. To identify thatlevel of performance in time for mediation andcorrection the appropriate quantitative metricmeasurement and tracking processes must be established. These metrics keep a constantpulse on the provider’s progress againstestablished targets and can alert companies to issues before they escalate.

Buyer views on the most important measurement metrics have remained largelythe same for the past two years. Buyers stillview on-time delivery, cost effectiveness, anduser satisfaction as the three most importantareas of measurement. Unfortunately, we havefound that many buyers lack the rigor, structureand discipline necessary to measure theseareas in an effective manner. As a result, wehave noticed a drop in buyer satisfaction rates,as well as lower provider success rates inmeeting buyer expectations.

Providers, like buyers, have remained largelyconsistent in their views of how they arebeing measured -- with one notable exception.On-time delivery and cost effectiveness stillrank at the top of the providers’ list. However,service availability has moved up into thenumber three position while user satisfactionhas dropped in comparison to last year. Is thischange important? We believe that the elevationof service availability in the eyes of the provideris indicative of a trend that more outsourcingproviders are starting to focus on real-timeservices like data center operations and production support. Availability is critical forthese services. It is also an indicator that ismore easily measured in a quantitative manner.We also expect buyers to put more emphasisin this area in the coming year as they look tooutsource more real-time processes.

Also of interest is that the timeliness of fillingstaffing requests – with quality individuals – is still a key buyer criterion. This reflects continuing capacity issues in the industry asproviders struggle to attract and retain thebest individuals. Many buyers have seen alarge amount of turnover in their outsourcingprovider’s staff over the past year and theyare not happy about it. This is an area whereproviders will continue to struggle for sometime as the industry matures and goes throughinevitable consolidation and restructuring.

ITOUTSOURCINGMANAGEMENT

“You get what you inspect, not what you expect”

- Senior Vice-President, Financial Services

Buyers continue to improve in their ability toeffectively manage outsourcing relationships.Increased governance over performance metrics, onsite reviews and better providerrelationships are becoming standard practice.However, buyers still fall short of extracting thefull value from many outsourcing relationships.The reason is two-fold. First, many buyers are suffering from a lack of clear directionand management due to their reliance on ill-conceived and poorly managed metrics todrive decision-making. Second, providers arefeeling pressured to meet targets on thesevery same misguided metrics without a compelling reason to do so.

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Proactive PerformanceManagement

What level of relationship governance mustcompanies establish to ensure the success of their ongoing outsourcing initiatives?

Establishing the correct delivery metrics andSLAs is only part of the equation. Consistentlyevaluating a provider’s performance againstthose metrics is equally critical. For reviewsfocused on metrics, the numbers are almostidentical to last year. The majority of buyers(68 percent this year compared to 70 percentlast year) and providers (68 percent this yearand 69 percent last year) report metrics reviewsare performed monthly or more frequently.Twenty-one percent of buyers and 16 percentof providers report that they review metricsquarterly. The remaining respondents use asemi-annual, annual, or as-needed approach.We feel the consistency in these responsesover the last few years is a sign that buyershave reached a comfort zone in the frequencyof interaction required to effectively manageproviders.

There has been a significant change in the lastyear in regard to site visits to provider facilities.In each of our past studies approximately 25percent of buyers informed us they did not visitprovider facilities. This year only 8 percentindicated that they did not visit their provider’sfacilities. Our prior two studies also indicatedthat only 25 percent of buyers performed thesevisits quarterly or more often. Today, that numberis 42 percent. These results demonstrate thatbuyers are reacting to the need for strictergovernance over their outsourced operations,and feel a greater sense of control by holdingregular face-to-face discussions.

Managing the Relationship Overall

It is extremely important for buyers, as part of acomprehensive sourcing strategy, to periodicallyevaluate their overall satisfaction with theiroutsourcing relationships. Assessing andaffirming metrics, SLAs and overall providercommitment to delivering value should be partof this due diligence process. We polled studyparticipants to better understand how buyersreview their overall outsourcing relationshipsand the frequency with which they conductthese reviews.

Buyers are assessing the value delivered bytheir outsourcing providers more often than inthe past. Last year, nearly 50 percent of buyerssaid they carefully evaluate their overall out-sourcing relationships on an annual basis.Today, 51 percent of buyers perform due diligence on existing provider relationships

each quarter and 19 percent do it even moreoften than that. This is a significant shift fromlast year and demonstrates how buyers arededicating more time to ensuring they havethe optimal provider relationships in place.

Overcoming Key Relationship Challenges

This year’s study asked buyers and providersabout the challenges they face with one anotherrelated to service delivery. Buyers were most

concerned about impacts on day-to-day operational activities, including delays in issue resolution (56 percent), while missedproject deadlines, inadequate work estimationcapabilities, inadequate skills, and conflictingcommunication styles were all cited by 40percent of buyer respondents. The timing ofissue resolution and the delivery of projectsis relatively easy to measure and improveupon, even from a distance. The increasedemphasis we are seeing on more reviewswith providers is due in part to these secondarybut essential aspects of outsourced delivery,communications and resource skill proficiency.

Finally, we asked providers to tell us about thekey challenges they have faced when dealingwith buyers. Not surprisingly, the challengemost often cited was unrealistic buyer financialexpectations (52 percent). Following closelybehind that was a lack of clear directive (45percent). Grouped closely together in thirdplace, with 34 to 39 percent each, were theissues of poor decision-making, poor projectmanagement, and low executive commitment.All of these challenges are indicative of buyersnot adequately managing their outsourcingrelationships.

We believe that for buyers and providers totruly be successful in working together, theirrelationship must include four key components:

• Buyers must treat sourcing as part of an overall strategy and not as a set of transactions as a means to cut costs

• Buyers and providers must establish win-win propositions where neither party feelslike they have been taken advantage of

• Buyers must establish clear and meaningfulmetrics and measures to gauge the successof their outsourcing endeavors

• Providers must continue to strive to understand buyer demands and focus on exceeding all customer expectations

Providers are well-aware of the obstaclesbuyers face in managing outsourcing relationships. Conflicting communication styles(26 percent) and delays in issue resolution (22 percent) were also on their list of buyercomplaints. However, providers differ in opinion when it comes to the notion of havinginadequate skills, with only nine percent indicating that they have had a problem in thisarea. There is a large disconnect betweenbuyers and providers regarding the capabilitiesof provider personnel. This is not surprisinggiven that offshore providers are experiencinghigh attrition rates. In our opinion, providersshould re-focus their efforts on recruiting andmanaging outstanding people as this willbecome a key competitive differentiator.

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Buyers

• Outsourcing is always harder than you originally thought.

• Cost savings alone is not a good reason to outsource.

• Leverage resources with experience and skills in outsourcing to help you develop your own sourcing strategies and execution roadmaps.

• Clearly define your goals, measurement metrics and exit strategies up front.

• Well-defined governance structures and proactive management and communication are the keys to success.

• Structure your vendor relationships as win/win propositions.

• Outsourcing your problems won’t solve them. You should fix potential problems first before you hand over the process to someone else.

• Establishing very specific and measurable SLAs is crucial for evaluating performance.

• Give providers a chance to be successful. Transitions take time.

• Due diligence on providers is essential if you want to avoid surprises.

• Internal resistance to outsourcing can be managed but you have to foster proactive and candid communications to succeed.

LESSONSLEARNED

Providers

• Successful outsourcing requires strong buyer commitment.

• Be prepared to talk to buyers in terms of business value.

• Buyers and providers need to be long-term partners.

• Buyers should recognize that providers need time to be effective. Bringing on an outsourcer can’t happen over night.

• Buyer expectations and objectives are always evolving. Make sure you understand them at the outset and are nimble enough to satisfy them when they change.

• Resistance to outsourcing and uncertainty about its value are still issues in many organizations.

• Contracts and negotiations need to be customized for each situation.

• It’s still difficult for outsourcing firms to differentiate themselves and cost is still very important to buyers.

• You’ve got to be able to work closely and communicate clearly with buyer management to be successful.

• Cultural differences need to be acknowledged and managed.

• Establishing a mutual understanding about governance structures, SLAs and performance expectations is critical.

In the qualitative portion of our research we asked Buyers and Providers to share theirinsights and experience with their peers. The following is a representative sample of theirfirst-hand observations from the front lines of outsourcing.

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©2005 DiamondCluster International, Inc. All rights reserved.

For more information visit our website:www.diamondcluster.com