Discussion: "Outsourcing" is Not Going Away

From Presidents to Shareholders, "outsourcing" has long been a favorite pummeling bag incorporating – as is widely believed – a host of undesirable traits hidden behind some superficial cost savings. Accenture, earlier this year, even went so far to drop "outsourcing" from its tagline. So, does this mean that the phenomenal growth of outsourcing as we know it is coming to a grinding halt? Most definitely not. More realistically, perhaps nomenclature is ahead of the market (it usually is) – or lagging what is already a reality for many. However you slice and dice it the truth is that the value of delivering certain services from an out-of-house, third party expert is indisputable. And while CIO.com recognizes changes reflected in new ITO trends, it's really more of a shift than an end. Even Germany, so hesitant and more limited in many of its sourcing decisions, is increasingly showing interest in leveraging externally enabled sourcing strategies (many in-country) to complement its corporate operations. What is happening, however, is the continuation of a steady erasing of lines between provider and company. We’ve talked about "partnering" for years. Well, it’s a reality now (and those contracts that don’t incorporate a partnering approach will have a limited lifespan, more often than not offering "mere" cost savings with very limited upside potential; and there are only so many years that you can go along with that, given all the changes in the external markets). The shift from "outsourcing" to "BPO" was the first sign that providers were intent on emphasizing their collaborative potential (and, perhaps, offering their moneyed clients a softer sell on what is still often perceived as an unpopular strategy for sending domestic jobs offshore). Working together, sharing data, coming up with entirely new ways of solving a problem which may include dropping a previous service completely … that is the way of the new world. It makes no more sense today to recruit and train your own army of transactions specialists than it did 15 years ago. Labor arbitrage is alive and kicking, but most companies don’t want the headache of setting up an offshore captive themselves to take advantage of lower cost FTEs. So that element of outsourcing – call it what you want – will continue; is, in fact, growing: Witness the Philippines broadening its non-voice support services or the investment pouring into China’s 21 business process outsourcing parks (you can find out more and get first hand information from our Philippine BPO and China events later this year). An important change factor of course is automation, much of which is serving to change the nature of transactions staff that were employed in the past. But while new technology like Robotics Process Automation will probably cut down on the numbers of staff needed to manage a process, it will also shift the skills required, and you’ll still want to hire (or pay for) the most cost-effective solution. Hard to compete with Asia’s rising tide of multi-lingual talent. Operations are global and the world is flat (we were told that long ago – even children learn at an early age that all their toys are made in China), and the trend towards international sales and operations will only continue. So, too, will the need to make smart sourcing decisions to remain price and cost competitive. As companies enter new, unknown marketplaces especially across Asia, many are partnering with boots-on-the-ground service suppliers who take the hassle out of setting up their own operations, offering sliding scale and industry- as well as market-expertise. What’s not to like about that scenario? What will define and differentiate tomorrow’s winners is a shift from the blinkered "outsourcing" of a specific part of an end-to-end process (it sounds quaint, just writing about it) towards the holistic management of a "global" process, under one global process owner (get used to the term "GPO"), which includes a smart brand of partnering with a third party expert (oh, ok – let’s call them "providers" instead of "outsource providers" – we all know what is meant). These guys will be applying complicated formulas to their customer’s data to deliver the kind of analytics that were previously unimaginable, to deliver increasingly forward looking, "predictive" business and customer specific suggestions back to their clients; which, in turn, allows the client to make even better decisions. "Plus Ã¨a change, plus c'est la mÃ«me chose." Have your say ... Comment on my LinkedIn discussion of this post now. [inlinead]

Discussion: "Outsourcing" is Not Going Away

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