8 latest trends in outsourcing

Economic downturn and advancement in technology have resulted in more and more companies resulting to outsourcing in the post global crisis era. Companies are looking out to outsource more of their functions as a way to reduce cost and to improve their business outcomes and hence the complexities of the functions outsourced by the companies are also increasing.

Earlier it was just customer service that was outsourced but now more services like sales/collection are also getting outsourced. Similarly services that are outsourced range  from simple account processing to GAAP account processing, from simple IT outsourcing to software development to complex FAO, HRO, legal and KPO.

Following is a discussion of latest trends in outsourcing sector post global crisis.

  1. Outsourcing of non core business has been increasing, but, companies now look to outsource more of their processes. During the early phase of outsourcing, companies focused on leveraging their existing resources. However, now the concept is changing. Companies are looking to outsource in increasing proportions and want the service provider to take up the responsibility of business outcomes.
  2. Cost has always been the primary reason of outsourcing for years. However a different view for outsourcing is emerging. Today companies while making outsourcing decision weigh benefits in terms of business outcomes and quality improvement rather than cost reduction alone.
  3. For any outsourcing transaction to be successful, the companies need to choose the right partner. Today companies evaluate outsourcing partner not on the basis of cost but on the basis of business objective. They evaluate whether their outsourcing partner is capable enough to help them to achieve their business objectives. The vendors are also required to demonstrate their qualifications to their clients and relate to their clients’ industry, process, people and objectives.
  4. Outsourcing of FAO is increasing when compared to other outsourcing segments. Consequently, the deal size of the outsourcing contracts are decreasing.
  5. India has been always been the preferred outsourcing destination. However, outsourcing destinations are now expanding. Philippines, Poland and China are fast becoming the next outsourcing destination alternatives to India.
  6. Strong political will and sentiments against off shoring jobs in US will lead to the adoption of near shoring and on-shoring by the US companies. Already manufacturing companies in US are bringing back some of the process outsourced back to home. GE recently announced their decision to in-source 90% of their outsourced IT operation in next 3 to 5 years.
  7. More and more companies will adopt cloud services as it provides them more flexibility and free them up from the burden of setting IT infrastructure in their companies.
  8. In future, the high level complex and analytical process like planning, investor report, accounting policy that has less probability to outsource will be consolidated by the companies. They will create their own centers of excellence to process such complex works.

These are the eight latest trends in outsourcing. With no doubt, it can be said that outsourcing will continue to be the strategic choice for firms to lower cost and improve the quality.

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