Will the Sourcing Train Head Back Home?

Just as we are increasingly hearing "backsourcing" or "nearshoring" mentioned in the same breath as "rethinking sourcing strategy", some news sites are reporting on a trend that may well be a sign of what's to come. An article in the Times of India suggests that a number of the 10-year outsourcing deals struck back in 2003, and now up for renewal, might be brought back inhouse. These decisions, if made, may be the first of many ripples spreading out into the Indian IT sourcing industry that will have a significant impact on the Indian provider market. A lot has changed since 2003, of course, and we have, for some time, been hearing that client companies may want to shift their contracts as they chase flexibility and increasingly opt for the boutique kind of services offered by some of the niche players with industry-specific knowledge. Whether this is a significant trend will remain to be seen. With the industry itself having gone through monumental changes in the last decade, it's unsurprising to us, at SSON, that companies may be reconsidering the "build versus buy" option. Our "resident Professor" has just posted a timely blog on the trend towards backsourcing, and elsewhere, a Global Delivery Market Landscape report, by TBR, notes that India-centric providers are investing money in establishing US operations to offer the client-facing proximity that US clients are increasingly demanding. This may also mean that the traditional giants in the outsourcing market – Accenture, IBM, and HP – may need to come up with some new strategies pretty quickly to staunch what might still only be a slow trickle out. The Times of India article specifically mentions Procter & Gamble as considering bringing back inhouse parts of the IT outsourcing contracts signed with EDS [now part of HP] in 2003. My contact at P&G's Global Business Services, however, tells me that, "P&G has no current plans of moving IT infrastructure and BPO work in-house. In fact, over the past 12 months, we have increased our pool of outsourced IT work to Indian IT firms like Infosys." This work, I am told, includes high-profile projects like data management and procurement services, and the company plans to continue to partner with key technology leaders, on an as-needed basis, as its business grows. Furthermore, the spokesperson tells me that India remains a key priority for P&G, having delivered over a decade of consecutive years of over 20% organic growth: "P&G is firmly invested in India via its existing and upcoming manufacturing facilities, via the approximately 35,000 jobs it creates directly and indirectly, and the tax it pays." So news of P&G's retreat may be premature – but we should watch the headlines for what others are doing, as renewal time approaches. Are you reconsidering your shared services or your sourcing strategy? Have you recently signed with a new provider? Please comment in the SSON Linkedin group (over 24,000 members), where we have opened a discussion on this question. Full article Times of India [inlinead]

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