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Sunday, January 22, 2006

Transformational Outsourcing - Its Real

We recently covered on the topic of the phenomenal increase in average productivity growth , the growth rate in the last five years in the US is seen to be the highest over the past half century. Productivity associated with offshoring is always a hot topic- given that all major enterprises are actively embracing it - this draft OECD paper assessing offshoring & productivity finds positive correation between these two - atleast in the service sectors. Technology’s contribution is not just the progress that we see in the conventional sense –it is contributing highly positively to the economy & the expectation is that it should continue to do so in future.
Bweek writes about the new buzzword - "transformational outsourcing"- and suggesting that there’s a new attitude that is emerging in corporations across the U.S. and Europe in virtually every industry. A well written article starts by highlighting that the world is discovering that offshoring is really about corporate growth, making better use of skilled U.S. staff, and even job creation in the U.S., not just cheap wages abroad. The gains on labor savings pales when compared to the enormous gains in efficiency, productivity, quality, and revenues that can be achieved by fully leveraging offshore talent.The benefits can range from a chance to turn around dying businesses, speed up their pace of innovation, or fund development projects, create game changing radical business models,or help look at it as a broader plan to overhaul outdated office operations and prepare for new competitive battles. The uncorking of energy towards innovation and meeting customer needs and means to survival are all associated with benefits of offshoring.
Don’t miss out reading the fact that the offshoring maturity is reaching new heights – almost akin to “Processes , on sale” The net effect : Some believe this would lead to realigning companies to deliver products faster at lower costs, and are better able to compete against anyone in the world, others theorize about the "totally disaggregated corporation," wherein every function not regarded as crucial is stripped away. Some use this to create lofty goals – P&G wants 50% of all new P&G products to come from outside by 2010, vs. 20% now. Detroit and European carmakers may go the way of the PC industry, relying on outsiders to develop new models bearing their brand names. Big Pharma will bring blockbuster drugs to market at a fraction of the current $1 billion average cost by allying with partners in molecular research and clinical testing. The rise of the offshore option is dramatically changing the economics of reengineering. Read my recent article on the emergence of disruptive models in the software industry. Clearly the winning companies of the future will be those most adept at leveraging global talent to transform themselves and their industries, creating better jobs for everyone.

Complete with graphics and well tabulated data, it’s a neat read. Do not miss out the compilation of hot players in the offshore outsourcing world( though some statistics needs update in classifying players doing above billion dollar business & also some promotions into 500millUSD club even while it may well happen several qyarters into the future (clearly unitended though - but beware - Gartner/Bweek need not be right always! - this time even in reporting public financial numbers), major players in Outsourcing, Modular corporation. The case studies of Penske & BoFA makes the reading more rich. Is it all one sided - Hardly- Look at
this, relate Genpact came from the GE stable. Next time around while covering the topic - hopefully Bweek shall come with up benefits in hard numbers(these are beginning to get available) to make readers understand the impact in numerical terms much better.

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