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Saturday, June 23, 2007

Outsourcing Mantra : From Faster & Cheaper To Better & More Innovative

Traditionally business has chosen to outsource just certain aspects of their enterprise, often with different vendors managing different aspects of their business in order to achieve cost savings. But a new survey by the Brown-Wilson group indicates a growing trend away from outsourcing to outsourcing in which companies focus on fewer service providers and vendors expand into different services to better serve their clients.

The Black Book of Outsourcing survey aims to identify top outsourcing vendors and advisers, as well as industry trends, based on responses by outsourcing decision-makers (survey of over 117,000 invited outsourcing governance officers including CEOs, CFOs, Procurement and Purchasing Officers, CIOs, Human Resources Directors, Strategic Consultants, User Management and buyer decision makers. The focus of the survey is to draw out the outsourcing user experience concerning service providers globally). A quick view of the rankings published at the well researched, recently released report titled the state of the outsourcing industry.

The report sees reaching the point in the evolution of outsourcing where the “faster and cheaper” and the “better and most innovative” are about to cross critical paths. One key finding in this year's survey is a shifting focus from cheaper and faster performance to a focus on client satisfaction, with managers of client companies favoring outsourcing suppliers that provide better and more supportive innovations, such as responding quickly to help clients manage a crisis. Vendors that ranked high in prior years for saving their clients big money are now slipping lower because they're seen as putting their own company growth goals first, according to Douglas Brown and Scott Wilson of Brown-Wilson Group. Companies that performed best in the 2007 rankings focused on adapting to their clients' strategies rather than applying a cookie-cutter approach, they conclude. While China has seen a tremendous increase in outsourcing investment in the last year, Mr. Brown says it is interesting to note that Chinese companies scored very low levels of satisfaction in the survey.

Finally outsourcing is not just about offshoring . The distribution mix of revenues out of a total of around trillion dollars (expected to touch 1.5 trillion dollars given the growth rate of 30% annually):
4% to India
3% to China, Philippines & SE Asia
57% to United States
36% to global locations excluding US, India and China/Southeast Asia.

Read the full report - it has an excellent collection of data points, measured on various dimensions. A customer-imposed changing of the vendor guard forcing some old school Big 6 leaders to be replaced by a newly ruling set of global industry influencers means that the industry is in the cusp of a major change and with offshoring bringing some cases, the order of fifty percent saving, through well thought out mechanisms, this space will see lot more action for sometime to come.

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