Outsourcing Mentor, Blog

The 2007 Outsource World London conference completed yesterday. On the whole it was a worthwhile experience with a number of good speakers. There did seem to be a dearth of delegates with exhibitors outnumbering them at all times.

This provided some advantages for the outsource purchaser. There was plenty of opportunity to chat to exhibitors and try to work out what they offered. As with any outsource conference there weren’t many original ideas among the vendor community. There was a far amount of SME vendors, all saying the same thing, desperately trying to wrap it around a weak USP. Then there was Wipro; realising that the lack of large buyers meant it wasn’t worth trying. It seemed as if they were there because they have to attend every international conference rather trying to get new clients.

The talks were on the whole good although there were too many with not enough time between them. In 2 days there were 13 talks and 2 panel discussions. One of the prime functions of any conference is the networking between sessions. This time was reduced to lunch and a few drinks at the end of the first day.

Some of the highlights

“A new age of disruption” by Richard Holway – Discussing how disruption in the standard models of business is increasing and the pace of disruption will continue to increase. Businesses have to embrace the disruption or be sidelined as customers move elsewhere.

“Offshore Vs Captive” A panel discussion. There were some interesting points raised about outsourcing and whether you can outsource or move captive, a core business function.

“SME or MNC: ‘One foot in the Global’ for Competitive survival” by Dr Richard Sykes – saying that large or small, organisations must embrace outsourcing in order to survive on a flat earth.

“Offshoring – Is it still the Panacea” by Stephen Bullas – suggested that outsourcing can, and does work, but must be judged in a case by case basis and any outsource project should be preceded with a pilot project to judge vendor fit.

Summary:

The choice of a correct vendor crops up time and time again in all conferences. Failures in an outsource relationship are 9 times out of 10 attributed to human issues. Choosing the right vendor and ensuring the correct governance within an organisation can alleviate and reduce risk factors in this area. Effort must be taken on both sides to maintain the relationship and ensure it grows during the relationship lifecycle.

The recent New York Times article “Eastern Europe Becomes a Center for Outsourcing” talks about the increase in outsourcing close to home. This displays the inevitable spread of outsourcing to all low cost, educated regions of the world. It is not necessary to go as Far East as Asia to find vendors willing to supply outsource services.

From the article the wage differential in the Czech Republic is about 3.5 – 1 which means for a single worker in Western Europe it is possible to have 3.5 workers in Prague. This may not be quite in the league as the 8 or 9 -1 in Asia but the benefits of having your vendors within a few time zones of you and immediately having a closer cultural fit may outweigh the cost benefits.

The expansion into Eastern Europe is not even close to the scale that is seen in India. There the MNCs swoop in a suck up thousands of workers. The local employment pool wants to work for the likes of CA or Microsoft. These organisations are not yet dominant in Eastern Europe. This means that, for SMEs there are vendors eager to talk. Growth of 30% a year in outsourcing will be fuelled in part by MNCs but a quick, well informed SME can find a multitude of vendors to outsource with.

The article talks about an increase in Outsourcing revival in 2007. The last paragraph mentions that SME outsourcing could form an increasing part of this. The large “Mega deal” outsourcing has reduced in 2005 – 2006. MNCs are moving towards muti-sourcing deals which means that vendors are having to become more agile and deal with smaller contracts and competition on the same service.

Vendors dealing with smaller contracts and the increasing interest SMEs have in outsourcing means that the vendor market will start to offer smaller boiler plate services for SMEs. This can already be seen in some tier 2 countries (Philippines, Sri Lanka, etc) and will swiftly move into the Tier 1 countries.

The overall increase in outsourcing is inevitable and can will stimulate both client and vendor countries. The number of jobless in the US has continued to decline as more jobs are outsourced to countries like India. Outsourcing allows continuous growth of companies with cost savings this growth will fuel the economy and increase the overall nu,ber of jobs.

Link to article