1. Services will get commoditized. By 2010, customers of outsourcing services will be able to buy most low-end services off the shelf, and define the price points and turnaround times for those services. Some such services will be around desktop and server support, standard and legacy applications maintenance, employee-data management, benefits and payroll management, general accounting, accounts payable
and receivables, customer service, telemarketing and medical transcription.

2. Customers will bypass RFPs. With the skill sets and capabilities of the top few IT and BPO service providers getting well established, customer companies are less likely to spend time on request for proposals and extended provider evaluations when seeking services from the established top tier providers. Their sourcing will be on the fast track.

3. Global sourcing offices will be “almost” ubiquitous. Global sourcing offices will be on their way to becoming integral “horizontals” within companies, just as HR and finance are today. Some of these offices will be set up outside of the parent companies’ home country, in places like Brazil, Russia, India
or China.

4. The rise in offshore wages will not slow offshoring. Offshore wages will continue to increase at a rate faster than American wages, yet the absolute differential between the two salaries will not be alarming and companies will continue to offshore for labor cost arbitrage.

5. Offshore service providers will grow inorganically. There will be significant consolidation in the offshore IT and BPO provider landscape, with the larger players acquiring smaller companies with specialized niche skills. Many such deals would be cross-border deals.

6. Europe will emerge as a big outsourcing market; Japan will not be far behind. These markets will drive global sourcing in the years ahead, and offhsore providers will look to them to hedge against the fluctuating dollar. Many providers will invest in smaller provider companies in Europe to be clsoer to the market.

7. Russia will emerge as an IT-services hotspot. Russia’s strength in engineering, mathematical and statistical skills will get it wins in large global outsourcing deals. On the IT-services front, the India-China debate will by 2010 become an India-China-Russia discussion. Yet, because of the country’s stake in oil, domestically the Russian IT industry will never (!) get the status that the Indian IT industry has earned itself.

8. Tier-2 cities in offshore locations will become IT and BPO service hubs. Rising wages and attrition levels in the tier-1 cities of the top offshoring destinations in Asia, Latin America and Eastern Europe, will result in companies sourcing services from the smaller,  tier-2 in the regions.

9. The captive model will survive, albeit for high-end work. The high cost of running offshore captive centers will compel parent companies to sell captive centers that provide BPO services. At the same time, companies will continue to set up captive units for those types of work that have an element of intellectual property, confidentiality or security issues, such as R&D or engineering services.

10. Contact centers will move closer to the time zone. Companies will prefer to set up contact centers in nearshore locations — Latin America for the U.S.A., and Eastern Europe and North Africa for Western Europe — rather than in far off India. But the Philippines will continue to be preferred by the Americans.

Juhi Bhambal is the editor of Global Services.