Executive Summary

The entry of labor arbitrage into Application Development and Maintenance (ADM) outsourcing redefined the market and created a ~US$20 billion offshore industry, which enjoyed fast growth for more than a decade.

The growth dynamics of the ADM market are undergoing a significant change with several headwinds slowing down the pace of growth and large buyers reevaluating their strategies. In most cases, re-evaluation is leading to decisions to consolidate a large number of opportunistic relationships into a single coherent portfolio.

The quality of relationships and suppliers account-management capabilities are likely to become defining factors in buyers consolidation decisions. This new growth paradigm will create significant opportunity for suppliers that manage to build on their existing relationships and position themselves as true partners. Suppliers (both traditional and offshore) that significantly upgrade their relationship-management capabilities are more likely to emerge successful from the consolidation.