Emerging Trends in the Outsourcing Industry
Outsourcing has become part of the daily life for the corporate community globally and being such an integral part it has become critical to evaluate performance of outsourcing provider's right to the bottom. Outsourcing providers are also restructuring their global strategies based on the emerging trends in the Outsourcing Industry.
Focus on Improving Outsourcing Effectiveness
It may be right to admit that Outsourcing is not always a pleasant experience as the Industry matures and leaves multiple choices for buyers on the shelf. There ought to be bad apples among the good ones.
Today, companies are going beyond finding advisors to review Contracts and Service Level Agreements to evaluating providers who have the expertise to manage off shore providers and provide metrics to evaluate performance. Companies are building exclusive departments to cater to this growing need, dedicating resources on a full time basis to manage Off-shore companies, and strengthening their relationships by extended stays in provider locations.
Re-Insourcing is slowly Becoming a Reality
This is definitely going to take the sleep away from quite a few Outsourcing providers. However, it may not be too late if they focus on emphasizing more on outsourcing effectiveness. With a lot of risks involved with Outsourcing as a strategy, complete outsourcing may take a back seat with a lot of function being called back. Resource optimization is a strategy being followed by the veterans in the trade.
Providers need to pull their socks and "walk the talk" to retain clients.
The 2008 US Presidential Election may slow down Growth
The effect of Outsourcing on US jobs will always remain a topic of significant importance in all Presidential Elections with Democrats taking majority control in Congress and presidential campaigning well underway. Trends forecast there may be a slow down in 2007-08 similar to the backlash experienced in 2004. Many organizations may begin to delay major outsourcing decisions as the election nears.
Cooperative Captives are becoming the New Mantra
Wipro and Motorola announced a joint venture to host a global network operation center represents a movement called "cooperative captives."
Companies are trying to enter India and China and building relationships with Providers to leverage benefits such a Government acceptance and domain maturity. Joint ventures can jump start businesses almost immediately and saving the hassle of setting up a completely new entity overseas.
India already hosts a middle-class population of 300-400 million while China's middle class is expected to grow from 130 million to approximately 600 million (twice the size of today's US population) in the next 15 years and more US and European-based companies recognize the potential of changing consumer demographics. This is too much to actually ask for and therefore, US and European firms will craft outsourcing strategies not only to leverage hurdles of Government Regulations and additional capabilities/ cost savings, but also to become exposed to these growing markets in terms of knowledge, brand, suppliers, and eventually customers.
Expansion to Accommodate High End Requirements may Accelerate Rates
Rates will rise as second-tier providers seek to expand their operations to meet growing consumer demand for higher end requirements also keeping a balance on low cost operations.
Companies may end up losing trying to strike this balance and explaining the need for higher costs to accommodate higher end services.
China will leverage the 2008 Beijing Olympics to Increase its Outsourcing Foot Hold
China will take advantage of the 2008 Summer Olympics to promote its position as an outsourcing super-power, highlighting its increased focus on English education, a booming economy, and a growing pool of highly qualified software engineers.
The number of buyers that expect to outsource IT functions to China has soared 48 percent between 2004 and 2006 and the Olympics are the perfect platform for Chinese outsourcers to begin to convert further convert expectations into real market share, and establish their reputations as capable, high-quality providers. However, there is still debate on if China will be able to reach the levels of India as a destination of choice.
Greater Demands for Employee Security Checks
With the growing number of frauds in Indian Outsourcing, NASSCOM has established a National Skills Registry of employees working at Indian outsourcing firms. Today, customers are emphasizing the need to verify the qualifications and backgrounds of specific employees
Off shore providers and today meticulously focusing their energies on carefully screening employees, verifying work histories and backgrounds, and using the issue of employee screening as a competitive edge.
The survey is available online at www.diamondconsultants.com