IT Outsourcing, Offshoring, and the Globalization of Managed Services

IT Outsourcing, Offshoring, and the Globalization of Managed Services: An American Perspective

By Charles Weaver, JD

The American political debate over outsourcing and offshoring has generated a plethora of opinions. No matter which side you take, the indisputable truth is that the increasing globalization of the world economy makes everyone integrally linked to one another. But with all the discourse over utilizing the tremendous opportunity and potential of Indian companies and workers, there still remains a large misunderstanding of how Indian based companies can best take advantage of their important role in the global economy.

Managed Services and Offshoring

The managed services industry, like many other industries across North America, is coming to grips with how they should respond to the offshore potential India has to offer. Just as the promise of managed services brings companies higher quality of service, greater network uptime, and predictability, so does the advent of offshore partnerships.

The first wave of Indian companies that approached US shores several years ago were met initially with hostility. The primary reasons were not only the political animus and debate that was taking place at that time, but a large portion of the blame lies at the feet of Indian companies who thought that the mere lower cost of labor was enough to persuade corporations to engage in offshoring relationships.

Although the pure economic argument was indisputable, the methodology employed was obviously not persuasive. Many North American firms felt the aggressive onslaught of offshoring was a direct threat to their client base. This sentiment was undoubtedly brought on by the sales and marketing messaging of Indian companies who thought that US and other organizations would simply hand over their valuable relationships with little or no trust.

Today it is a different story altogether. As companies of all varieties, but specifically focusing on managed service providers (MSPs) for this article, try to keep up with the rapidly changing technological needs of their clients the compelling reasons behind developing partnerships with offshore entities is becoming more self-evident.

Cost Control is Still Important

The managed services business model is no longer in doubt. It is no longer a questionable business practice and indeed could be labeled a world wide phenomenon. Companies of all different shapes and sizes are entering the managed services marketplace everyday. As these MSPs shape the future of how consumers deal with IT management, they themselves must come to grips with higher costs of service delivery, indirect market regulation, competition, and other factors that affect their overall margins of profit.

Enter the strategic offshore partner. The second wave of Indian offshore partners has had much more success in approaching their North American (and elsewhere) clients. Mindful of the close relationship MSPs have with their end-user clients, this new breed of Indian offshore company is cognizant of the pain these MSPs are in and bringing much needed rejuvenation and opportunity to them. No longer are these Indian companies asking for everything. Rather, they are selecting strategic on-shore partnerships with companies that can truly leverage and take advantage of their lower cost of expertise.

Location, Location, Location

Despite the ability of managed services to deliver robust solutions to virtually anywhere in the world, the idiosyncrasies of today’s client is such that many of them still demand a human presence to accompany the IT service they are consuming. Add to the mix the fact that many corporations today are growing and expanding their operations to far reaches of the globe making their IT partners a necessity in those expanded regions.

For many North American based firms, expansion into India has been a natural course of business. Many companies have actually taken the partnership concept one step further and actually acquired their own facilities in India.

No matter what the motivations are, the inevitable conclusion is quite clear when it comes to offshore partnering. Many US firms simply cannot remain competitive without leveraging lower costs of Indian labor and geographic positioning. The critical question remains which Indian firms will understand that need and properly exploit it to bring realistic value to their North American partners without upsetting the balance.

About the author:
Charles Weaver, JD
President, MSPAlliance

Charles Weaver is the co-founder and president of the MSPAlliance, a global trade and consulting group for the managed services/IT outsourcing industry with close to 200 corporate members world wide. In addition to running the daily operational activities of the MSPAlliance, Mr. Weaver writes and speaks extensively around the world on the managed services industry.

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