I reviewed a recent webinar given by Pascal Matzke and John McCarthy from Forrester Research on the Future of IT Services.  It was a “teaser” that provided insight into their soon to be released paper.  As veterans and leading analysts in the sector, they have watched the sector grow and mature.  They believe we are at the crossroads of re-invention.

Part of their position is the belief that the wholesale benefits of the labor arbitrage and staff augmentation approach that fueled Indian offshore growth wave is coming to an end.  It’s been a decade of hyper growth and the sector will start to level off as organizations have successfully achieved large scale reductions in TCO through the use of offshore labor.  With legions of offshore developers available to enterprises around the world competition will focus on rates as savvy sourcing managers continue to seek cost reduction.  But, assuming that labor cost can never reach zero, how much lower can it go before quality and service risk outweigh the cost benefits? (more…)