he Information Technology (IT) outsourcing timeline, starting in the 1960s, provides the foundation for this chapter. To shed some light on market trends, historic landmark deals are detailed, such as Eastman Kodak (1989) and British Petroleum (1993), as well as market collaborations, including General Motors and EDS (1984–1996) and Philips and Atos (1989–2005), at that time BSO followed by Origin in 2000. The market trends in IT outsourcing are dictated by digital transformations requirements – basically, an unprecedented need for innovation and speed. What can be learned from these great case studies? 1.1 Introduction In essence, there are three components in Information Technology (IT): services, hardware and software. The boundaries between these components have never been very clear, and they have and will change over time. What will not change is the shortage of skilled professionals and constant innovation. This sets up the context for IT outsourcing. The below timeline is far from complete but paints a picture over the decades of this still young industry. 1960–1970s. IT outsourcing started in the 1960s by time-sharing of processing power, predominantly consumed by large corporates. Also, universities were early adopters as processing power increased the efficiency of their research, besides IT being a research object. Electronic Data Systems (EDS), founded in 1962, was one of the leading suppliers together with IBM, which was also the dominant hardware and software provider. The IT outsourcing market continued to grow steadily, predominantly regionally and nationally. 1980s. Due to their international presence and scale, IBM and to a lesser degree EDS started to expand in the 1980s in providing mainframe data centre services to clients across multiple countries. The international presence of EDS started in the Middle East in 1976 with King Abdulaziz University in Saudi Arabia and the government of Iran. In Europe, Hoskyns, founded in 1968 and acquired in 1990 by Capgemini, signed a large IT outsourcing agreement with the Greater London Council in 1986. In 1989, IBM and 1 Market trends in Information Technology outsourcing DOI: 10.4324/9781003223788-1 2 Market trends Eastman Kodak signed an IT outsourcing contract including the building of a dedicated data centre. 1990s. Meanwhile, the reputation of outsourcing was crumbling, due to job insecurity and quality of service concerns. The dominant reason to outsource was the belief that IT is not part of the core competencies of organisations. All IT outsourcing contracts were first-generation contracts. The transfer of staff was an important topic in negotiating and closing deals. Most deals were contracted “as-is” – the supplier continued to provide the service. Contracting “as-is” fuelled the debate about the desirability of IT outsourcing. 2000s. In this decade, transformational IT outsourcing contract began to emerge. Improving the services by a pre-agreed transition plan and adjusting the contracted services over time became easier. The rise of Indian suppliers was very apparent, e.g. Infosys, Tata Consultancy Services (TCS) and Wipro. Labour arbitrage was the name of the game. In parallel, the traditional suppliers are also ramping up delivery centres in low-cost locations, including the Philippines, Central America and Eastern Europe. Large organisations also began setting up their captive centres, which for the non-IT organisations was an intermediate step towards outsourcing, e.g. Bayer Business Services’ captive IT service centre in Mumbai, India, with around 550 employees was transferred to 2012, and Cognizant acquired UBS India Service Centre, including 2,000 associates for $75m in 2009/2010. Most shared service centres lacked scale, except for the shared service centres from technology companies, and faced high attrition and recruiting challenges. An increasing number of IT outsourcing contracts were second generation, and changing suppliers was perceived as risky. At the end of the initial IT outsourcing, contracts are renegotiated; this included adjusted services, including service levels and pricing. Also, the terms and conditions were discussed as part of these renegotiations. 2010s. Traditional suppliers continue to grow, some predominantly by autonomous growth, e.g. Accenture from 204,000 employees in 2010 to 492,000 employees in 2019, and others by acquisitions, e.g. Atos acquiring Siemens IT Solutions and Services (2011) followed by Siemens Convergence Creators (2018) and CGI acquiring Logica in 2012. The Indian services also continue to grow and in some cases merge, e.g. Satyam and Tech Mahindra, due to Satyam fraud followed by public auction of 46% of Satyam in 2009 and a merger in 2013. TCS grew from 160,000 employees in 2010 to 446,000 employees in 2019, whereas Wipro grew from 120,000 employees in 2010 to 170,000 employees in 2019. The argument to provide services from nearshore or offshore locations has changed from cost-efficiency to access to capabilities. Furthermore, significant investments are made in certification (think ISO and CMMi for individuals) to ensure quality and bridge time zone, language and cultural barriers.1