09 Jan 10 Outsourcing in 2010 (and beyond)

The new year invariably brings out predictions from a variety of armchair critics, so why should I be different? After all, I’m actually sitting in my armchair right now!

In an attempt to be different, I actually resisted the temptation initially, but finally succumbed. So even though these are a bit late, here are some more predictions.

Indian companies will continue to rule the roost, as far as offshoring is concerned: Though there is increasing competition from other destinations, India’s early lead (and therefore sophistication) will help keep Indian companies ahead of the pack. Even if work moves to other locations, Indian companies will be at the forefront of this move. We believe that Indian companies will be the most aggressive in terms of developing a multi-location delivery capability. After all, they have the most to lose (and the most cash)!

The Big IT & BPO companies will seriously invade new turf: Many knowledge service companies or KPOs believed that they had something unique to offer, services that large, generic outsourcing companies would not be able to compete in. This is changing, and services/verticals like legal services (or LPO), publishing, engineering design, research & analytics, etc. will see aggressive moves by Indian giants (like Infosys, TCS, Wipro, Cognizant, Genpact, WNS, etc). While this may seem like good news for niche KPO providers looking to exit, the giants are quite confident of their ability to drive organic growth, so will not be ready to offer premium valuations except in exceptional circumstances.

Platform based BPO will become all-pervasive: Another initiative by the IT biggies, platform based BPO essentially means using technology platforms to deliver BPO services cheaper and with higher efficiency. At ValueNotes, we’re seeing this across verticals and horizontals, including knowledge services. The use of technology is becoming critical to delivery of services, even for those services that appear to have little to do with IT. This further skews the advantage in favor of larger players, who have the ability to invest in such technology.

Cloud Computing will gain traction: This may seem like an old idea, as many have likened the cloud phenomenon to another form of outsourcing. However, traditional outsourcing providers will be threatened, especially in areas where the cloud might cut out traditional local providers (who typically offshore a few services). Examples of this could be tax returns filing, content creation or even jobs like transcription.

Analytics will become a necessary layer: A large proportion of outsourced services will adopt (or be required to adopt) a layer of analytics, as the thrust of cost reduction moves from labor arbitrage to efficiency. Whether it is CRM, recruitment or market research; the role of analytics will only increase. BPO providers will need to add analytics capabilities, or risk being relegated into a “commodity class”.

Newer forms of knowledge services will continue to emerge: As vendors mature and technology evolves, the limits of outsourcing will be expanded. Services that were believed to be difficult or impossible to outsource, will start being outsourced. This is particularly true for knowledge services (also called KPO), where the industry is still some way away from maturity.

And finally, outsourcing will not die: Contrary to the claims of many skeptics who believe that outsourcing is a fad, the industry will only grow in strength. This is despite political and other forms of dissuasion. One cannot really stop any kind of wave, leave alone a tidal wave!

And with that, here’s wishing you a great 2010.

The author, Arun Jethmalani, runs ValueNotes, a research company with a specialized unit dedicated to outsourcing.

Arun Jethmalani
Arun Jethmalani

Arun is one of the founders of ValueNotes. Apart from trying to build a high-quality research business, he has spent the last 27 years researching, analyzing, and dissecting companies and industries. He has worked with clients of all shapes and sizes, from all parts of the world – in providing them insights that make a difference to their business.
Prior to ValueNotes, he was an equity analyst/advisor, and wrote extensively on investing – including a column titled “Value for Money” which ran for 10 years in the Sunday edition of the Economic Times. To this day, he remains an avid “value” investor.
He has also been published in several other publications, and is a regular speaker at events related to technology, investing, competitive intelligence, business process management, Internet, etc. See: Valuenotes Events
He has been instrumental in developing a community of research and intelligence professionals in India, and is the founder and current chairman of the SCIP (India) Chapter. Arun holds a B Tech from IIT, Bombay and an MS from Duke University, NC, USA. LinkedIn Profile

5 Comments
  • KPO Philippines
    Posted at 07:04h, 12 March Reply

    I think this post is brilliant. THE year 2010 is bringing about a rosy picture for the outsourcing industry. Aside from the manufacturing and CPG industries, demand for outsourcing services will also increase from utilities, financial services and media. Geographically, demand will sprout in increasing number from Continental Europe and Asia-Pacific beyond the United States, which is the usual big customer. Services will be more on by phases approach rather than a “big bang” approach.

    Regards,
    Charlie

  • Knowledge Process Outsourcing India
    Posted at 09:39h, 01 March Reply

    Nice write-up! you bring up an interesting point. Going by the current statistics, the BPO/KPO wave is here to stay and Indians can now benefit much more than before. Large talent pools and favorable government policies together make India the most conducive environment for KPO. Several global players such as McKinsey, Reuters, Harris Interactive and Ipsos among others are already investing in India. As with the BPO sector, India is cost-effective and provides a vast intellectual talent with expertise in areas such as research and analysis.

  • sourcing initiatives
    Posted at 19:29h, 26 February Reply

    Nice post. I like the way you look at things. I just found this site using Google and I’ll try to watch for other things you write too.

  • Outsourcing Tech Support
    Posted at 12:48h, 21 January Reply

    This was a very pertinent post. A fabulous article with an amazing level of detail. Outsourcing offers many advantages. For instance, outsourcing allows companies to seek out and hire the best experts for specialized work. Using outsourcing also helps companies keep more cash on hand, freeing resources for other purposes, such as capital improvements. It’s also often cheaper in terms of salaries and benefits and reduces risks and costs.

    -Jamie

  • Anibal Santagata
    Posted at 00:41h, 20 January Reply

    I wanted to thank you for this great read. I definitely liked every little bit of it. I have you bookmarked and will be visting.

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