Outsourcing deals are now more specialized in nature

In the year 2008, Global sourcing advisory firm TPI predicted that despite the global economic turmoil the outsourcing industry over the world show an increase in the number of contracts or deals. TPI also indicated in one of the reports in the year 2008 that the nature and the size of the outsourcing contracts will change in the coming years. This proved to be true after 3 years as 870 contracts were awarded across the market, according to the latest TPI index. The interesting fact outsourcing contracts from small to mid-sized firms have increased considerably.

After globalization, firms were mounting with the issues of increasing cost and complexity to run business. Outsourcing was viewed as a solution to address these primary concerns. Now as the companies are becoming more global and attaining strategic development, the nature of the outsourcing decision is also changing. They are realizing that outsourcing has the potential to deliver business values beyond the cost savings and operational efficiencies.

The broader acceptance of these benefits prompted the small to medium-sized business (SMB) to adopt outsourcing services. This increased in smaller and specialized deals. Another reason is the risk involved in single-provider deals. The breakdown of the services deliverables had proved to be risk free in due course of time.

Another reason for the change in the nature of outsourcing deals is the shift in the firms approach to outsourcing. Firms are now looking for specialists and not generalists as they have started looking at outsourcing service providers as business partners. Firms are now ready to outsource more of their core services than the support services. Hence vendors domain expertise and specialist nature become critical in outsourcing engagements.

Service providers now provide specialized services to their customers in customer relation management (CRM), Human resource outsourcing, financial outsourcing, and information technology outsourcing. The firms can decide upon what to outsource depending upon their business needs, priorities and Return on Investment considerations. Service providers are hiring expertise personnel in the areas of CRM, Human Resource, Finance and IT so that they can deliver expertise and high value service to its customers which will keep the cost down for the customers. This attracts the small to medium business to outsource some of their operations.

With the entrants of new competitors to the market companies are striving to gain competitive advantage and differentiate themselves. Specialization is also seen as a differentiation tool for outsourcing firms to thrive in this competitive world.

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