Gartner MQ on Offshore Application Services

Coinciding with the Nasscom conference in India last week, Gartner issued its “Magic Quadrant” (subscription required) on Offshore Application Services.

An acquaintance asked for my opinion of the report. Here is my perspective:

a) Little too high level a definition of the market – it includes application outsourcing, application integration projects and staff augmentation. Skillsets to project manage an Oracle 11i project are very different from supporting a steady state, custom developed COBOL insurance application. By my estimation, the offshore component is larger than $ 40 billion in services a year, and the total application services market over $ 200 billion a year. Many Gartner MQs focus on much smaller IT categories.

As a result, Satyam which has the largest packaged application practice of any of the Indian firms does not show as an overall leader in the broader definition. An SAP specialist like Intelligroup or Mahindras(with Bristlecone) does not even qualify for the report. Xansa, a large UK based provider with a sizable offshore group does not show up either. Those and others meet Gartner’s revenue filters for the report.

b) India dominates the report. The majority of the 30 vendors profiled are Indian or western firms with growing Indian staffing (exception – Softtek). OK, so India has clearly been a preferred offshoring destination for many companies, but surely a Chinese or a Brazilian vendor could have been included. Many Gartner clients are looking for risk mitigation beyond India. While back up data centers and infrastructure can be duplicated much easier across the globe, application skills are people centric and not as mobile in an emergency. Would have been nice to see other markets covered at some level.

c)  No vendors are considered “visionary” by Gartner. Not one is showing any imagination or innovation?

d)  Accenture and IBM both show up in the leadership quadrant. On one measure – number of staff – they certainly qualify. But in pro-active selling, they do not. The last several deals I have been involved with Accenture, they have proposed a very small offshore component or declined to bid when they realized the competition was primarily other offshore vendors. IBM is only somewhat better. They are opportunistic offshore providers – so I wish Gartner had put an asterisk next to them.

Overall a nice summary of 30 vendors. Not surprisingly the SWITCH vendors show up the strongest (in addition to Accenture and IBM).

But Gartner says it has been tracking the offshore market since 1997. I wish it had provided more forward looking and "innovation" materials in the report. But like Forrester whose report I critiqued here, it is good to see the analysts pay more attention to this market category.

Since application services are people centric, it is appropriate to point out the team and the individuals proposed by a vendor matters much more than the brand or the positioning on Gartner’s MQ.