As a global research and advisory firm, Devott’s special strength and expertise concentrate on China’s market, technologies and future trends with two mutually supplementing directions - helping international companies enter and expand in China and helping Chinese investors/corporations go oversea. Because of China’s worldwide influence, the Chinese issues are also global concerns. To show our specialism, Devott announce its annual industry trends in the end of Chinese lunar year which normally fall in between late January and middle February. This odd timing sometimes gives our clients impressions being slightly late as their strategy guidance, but this year it allows Devott’s publication of 2017 Trends to be one of very few professional predictions embracing latest and also most fundamental changes of this industry.
International relations and geopolitical elements will be dominant influences over service trades and sourcing industries this year. The conventional decisive factors such as costs, prices, process controls will be secondary to the adoptability and flexibility of buyers and providers to accommodate uncertainties and changes. The influences in terms of depth or width will be unprecedented. The only thing certain is uncertainty. For the time being, buyers appear to have more worries and anxieties than providers, which is first time in this business.
Worldwide risks and uncertainties could fundamentally change basics business models and driving mechanism of global service trades and sourcing industries. No time in the history the industries face more uncertainties and turbulence, positive or negatives remain unknown than 2017. For buyers the very first instinct to reduce risks. To minimize risks, buyers won’t take in any unnecessary uncertainties for unconvinced returns. It will take much longer to evaluate and launch new programs and new projects. Renew existed relationship and businesses appear to be a safer option for both buyer and providers. Because of the uncertainties and perplexities, both buyers and providers will invest tremendously in research and advisory. 2017 could be the starting year of golden period of international research and advisory businesses.
Data security and operation reliability become the leading elements in global buyers’ evaluation list of domestic, near-shore and offshore providers. What makes year 2017 different is that global buyers have little tolerance of any providers whose qualifications and capabilities are less than what they demand in the two perspectives. On the contrary, buyers are much more bearable to price increase and/or project delay if the causes come from improving security and process accountability. No other time in the history providers could found better returns and buyers’ supports to invest on their security systems and reliability procedures.
Investments - M&A activities in global servicing and sourcing will be slower in 2017 compared to previous years, but much slower or speed up again in 2018 depending on more policy clarifications coming out from the major countries such as US. In the relatively stable regions where capitals are sufficient such as China, M&A activities would show a spike because of less options of worldwide locations and verticals. Among all available methods of market penetration and new client acquisition, M&A is one of the most effective for ambitious new players. The partnership between buyers and providers won’t be truly equal unless the partnership is built on certain types of capitals or ownerships.
Some new technologies continue to disrupt development of global service trades and sourcing, AI (Artificial Intelligence) tops the list in ourmarket forecast. We predict programming robots with equivalent programming capability of junior college students will be available in five years. Fifty percent of junior developers and testers in ITO will be replaced in ten years. The leading ITO countries must prepare for the scenarios where over half of their current developers won’t make financial sense in ten years. China’s service trades and sourcing industries have to face the serious challenges brought by the technologies, political turbulence and management immaturity combined. We believe one of the key solutions is to open up domestic markets of service trades and sourcing to all domestic companies and treat domestic companies same as global companies. Incentives and supports are insufficient to develop an industry to the global level.
SMB of global providers will receive more attention, considerations and businesses. Due to emergency of disrupting technologies and transformation of global market, global buyers will place more weight of selection on flexibility, vertical experience and industry solutions when they need external helps. So much so HR sizes, ramp-up/ramp-down space, skill width or experience portfolio are less important than before.SMBs win in these important new evaluations.
Global research and advisory firms entering strong growth period will focus on impact assessment and risk quantifications due to political turbulence, market volatility and corporate security measures. The selection of providers and locations could be different even from different units of same company. This is a reasons advanced studies in-house and external resource will be sought after this year. Policy risks, market stability and corporate reliability will be the themes of service trades and sourcing research .
Innovation will be the keyword of new waves of trade services and sourcing development. No one argue the primary driving forces (sole forces before 2017) of this business are cost reduction, adding new technologies and HR sources. The difference now and before is the ways of achieving the objectives evolve dramatically. The critical to the evolution is the innovation, without which is there no possibility for process improvements, delivery flexibility, new technology application and higher HR efficiency. It’s fair to say innovation is the life line of both buyers and providers.
Flexibility and adaptability precede stability and reliability for both buyers and providers combating unprecedented turbulence and insecurity starting this year. For this reason industry standards and governance of deliveries, process control become flexible and open to changes if higher level demands are there as well. There are so many variables in the industry standards, governance systems which new risks and policies were not included.
- Note: A brief report of Devott’s advisories to mitigate the risks will be published in the middle of February 2017. Please contact our marketing and sales teams for the latest guidance.