Outsourcing in 2010
January 31, 2010
The last decade saw outsourcing come into its own as a global multibillion dollar industry that had the ability to turn around economies and arouse a great deal of passionate debate on its desirability or otherwise. As we hit the second decade of the new millennium, what are the challenges that this industry faces and what are the opportunities?
Well for one China with its excellent infrastructure will continue to be the outsourcing hub of global manufacturing but with rising labor cost, we will increasingly see other countries like India, Indonesia and other places in South America and Africa take on some of the duties. By some estimates the value of the Indian outsourcing industry alone in 2010 will be a whopping $ 60 billion. Also large global companies can be expected to take over smaller firms in the developing world to whom they were outsourcing in the past.
In terms of what is feasible and what is not in the outsourcing universe, there are some interesting things happening. For instance outsourcing of IT Application Development is expected to fall on account of wanting to keep time and cost overruns on a tight leash. But at the same time IT Application Management and Maintenance and outsourcing are seeing a jump because these are seen as genuine cost cutting measures. As a matter of fact world telecom major Nokia Siemens recently signed up with Accenture with a view to outsource human resources and finance and control functions.
In the new scenario post the economic troubles of the past year the key factors in choosing to outsource are going to be largely influenced by capability and pricing. Which means a great deal of deliberation will go into deciding a vendor partner. This should actually augur well for the industry as it will instill stability. But at the same time businesses will look at a more innovative ways of accomplishing objectives and will increasingly expect the vendors to share in some of the risk as well as the profits.
Smart technologies like cloud computing are going to play an increasingly important role in bringing down costs and making outsourcing more in tune with current trends and requirements. This is particularly true of customer facing organizations which have large data storage requirements.
Sectors such as pharmacy and legal will be increasingly looking to outsource as the economies that accrue to them are quite substantial. In legal processes outsourcing or LPO for example there is an increasingly dynamic scenario with alternative legal delivery increasingly finding favor with clients as it offers them more streamlined and efficient services. India which has been a preferred destination for LPO will face stiff competition from the Philippines and South Africa.
As a matter of fact there is no danger of outsourcing ever going out of fashion. It has in fact become a basic template of the new world economic order where cost, efficiency and compatibility with the environment are the key drivers and outsourcing is a natural consequence of that.