Mumbai: Consulting firm neoIT predicts an acceleration of global services initiatives in 2007. The key trend for 2007, neoIT predicts, is business transformation, which global companies will leverage to improve time-to-market, gain new business, standardize processes and significantly lower costs. neoIT issued today a research brief that provides a snapshot of buyer, supplier and geographic drivers that will shape the top global services trends of 2007.

"Business transformation through services globalisation is one of the most important levers that global companies can no longer afford to ignore", stated neoIT CEO Atul Vashistha. "We see the services globalisation industry continuing to grow at a brisk rate of 25 per cent to 30 per cent in the coming year, as more and more companies ramp up their services globalisation initiatives."

The new report looks at the factors that contribute to the growth in services globalisation and identifies several trends. The report also takes an in-depth look at the impact that the increasing number of sophisticated buyers, who now have several years of global sourcing experience, will have on the industry.

On the supplier side and perhaps more relevant for Indian companies, the report says competitive forces are leading to increased supplier sophistication. The year 2007 will see an increased focus among service providers on developing industry-specific subject matter expertise through acquisitions.

In fact, acquisitions will be a continuing trend in 2007 with the white paper saying that eastern companies will acquire western outfits to gain a global footprint and venture into services that demand a significant onshore presence. Companies based in the West will take a keen interest in setups in the East to stay competitive as well as explore eastern markets, which are not only cost effective delivery locations, but also rapidly emerging markets by themselves.

Geographically, new locations are emerging, although India will continue to lead the supplier market, with Europe showing strong growth.

The research brief also predicts that billing rates will go up amongst the Tier 1 suppliers by 2-3 -per cent due to the growing demand for skilled resources, rise in wages, and increased overheads incurred in maintaining quality or ensuring tight security.

In addition, the report says that despite the ongoing debate about Tier 1 vrs Tier 2 cities and concerns of wage inflation, attrition and infrastructure issues, Indian Tier 1 cities (NCR, Bangalore, Chennai, Hyderabad and Mumbai) will grow at a continued pace in attracting offshore delivery work, through 2007. The European market for global services is also expected to grow at a faster rate with European companies offshoring to India, China and the Philippines, and other lower-cost locations, depending on the language and culture-dependence of the particular service.

Internationally, neoIT's report predicts that 2007 will see Russia emerge as a strong contender in the IT outsourcing market with an expected growth of 40-45% in 2007. It is currently the 3rd largest IT outsourcing supply market, behind India and China. Russian IT companies specialize in high-end software and embedded software product development, which acts as a differentiator from lower-priced offerings from Indian companies.