If you have already been outsourcing for a while now or if you want to try offshoring in this new year, you might be worried about the outsourcing trends that 2011 has to offer. On the bright side, outsourcing to India is expected to increase in 2011. However, this year, you would need to watch out for an increase in offshoring, reduction in quality, smaller contracts and cloud-related chaos.
Experts at the IAOP (The International Association of Outsourcing Professionals) have predicted that global organizations would choose to outsource key functions to fewer vendors, source to different countries and follow a retail model when it comes to outsourcing. There would also be an increased political acceptance about outsourcing.
As an outsourcer, you can look out for better technology, a continual increase in the growth of revenue, improved partnerships and consolidation, a boom in Latin America and improved risk management. Here are the top 10 outsourcing trends you can expect to see in 2011:
1. An increase in global outsourcing acceptance
The management practices of outsourcing have matured over the past year and have been used by global organizations. “More companies in 2011 would plan on using outsourcing as a powerful tool to build better economies and organizations,” says Michael Corbett, the Chairman of IAOP.
Corbett points out that the top 200 companies in today’s global outsourcing industry employ approximately 4 million professionals and one-third of those jobs are in the United States. He goes on to say that developed economies should recognize the immense value of offshoring and start tapping into the multi-trillion dollar outsourcing industry.
When U.S President Barack Obama came to India in November 2010, he commented that outsourcing is a “dynamic, two-way relationship that is creating jobs, growth and higher living standards in both our countries”. This has created a favorable political outlook about outsourcing to India.
2. Many sources will change outsourcing into a global phenomenon
In 2011, you can get ready to witness different sourcing arrangements. IAOP’s managing director of thought leadership and president of JDalal Associates, LLC, Jagdish Dalal, a Certified Outsourcing Professional says that UK, US and Germany will now start considering center onshore outsourcing just as they did offshore outsourcing in the past. 2011 will see more of ‘socio-sourcing’ and there will be increased competition to invest in lower rate offshore destinations.
IAOP Asia Ambassador Bobby Varanasi, COP, Chairman & CEO of Matryzel Consulting, Inc predicts that domestic outsourcing will gain greater visibility. 2011 will see the world becoming truly flat and Corbett states that it will not matter where the outsourcing work happens, as outsourcing is now a global phenomenon. Organizations will look for solutions and not shores. Companies will get access to the best talent whenever and wherever they need it.
“The outsourcing industry is set to move into a new phase,” says IAOP strategic advisory board member John Hindle. He says that there will be a shift from outsourcing to sourcing of business services and an adoption of the global business service models.
3. A boom in the Latin American region
The IAOP has predicted that the Latin American region, with countries like Peru, Costa Rica, Brazil, Mexico, Colombia and Chile, which are strategic locations to the US market, will experience a boom in 2011. “A strong government support for the industry, language and cultural compatibility as well as quality and size of the labor pool will drive the growth in this region,” says Santiago Pinzón Galán, chair of IAOP’s Latin America Regional Advisory Board and Executive Director of the Chamber of BPO&IT at ANDI (National Business Association of Colombia).
4. Outsourcing to grow in 2011
According to IAOP’s Global Outsourcing 100 data, in 2010, the revenue of outsourcing providers grew by 10%. This increase is expected to continue in 2011 as well. “The demand for outsourcing will grow and if you are a smart buyer you will return to the outsourcing market in 2011,” says Hindle. Dalal however predicts that the trend of highly competitive bidding and shorter durations of contracts with terms to alter the volume of service without re-opening contract negotiations will continue into 2011.
5. Increased risks in the outsourcing business
IAOP members predict that organizations in 2011 will have to learn to better manage security, financial, market and other risks. IAOP board member Dylan Taylor, Chief Executive Officer, Colliers USA says that security, technology, global regulation and the global economic policy will remain major issues in 2011. Shocklee, President and CEO of Global Sourcing Optimization Services warns that since companies rely on cloud computing and the internet, they will need to develop solid information security and data and also define their privacy plans.
6. The marketplace will now get retail
2011 will see organizations “shopping” for their outsourcing needs. Hindle predicts three categories of providers in 2011, namely, boutique firms providing customized services, big box vendors offering reduced costs and department store like vendors who can be trusted for support and advice. Hindle goes on to say that buyers can make their sourcing decisions based on this classification. Dalal forecasts that big outsourcing firms and offshore firms offering specialized services will rule the outsourcing scene while medium to small sized providers will struggle to survive.
7. 2011 will experience a cloudy vision
The earlier trend of organizations using advanced tools, technologies and practices to provide better operational flexibility and value will continue into 2011. Matt Shocklee, COP and IAOP U.S. Ambassador says that technology will play a major role in impacting risk compliance, governance, cost management and productivity. Hindle predicts that cloud computing will bring in both complexity as well as simplicity. While the procurement of specific services will be simplified, there will be an increase in the number of providers and thereby complexity in the service architecture. Hindle forecasts that there will be a need for buyers to ensure performance in the outsourcing process and integrate capabilities with legacy systems.
8. Retaining employee talent will be a critical challenge
In 2011, organizations will need to recruit, develop and retain their employee talent. Varanasi says that organizations will use more of social media to recruit employees globally. Dalal forecasts that companies will invest in supplementary staffing to handle increases in demand. This will bring about competition between traditional outsourcing service providers and supplementary staffing companies, says Dalal. You can watch out for “hybrid outsourcing” in engineering, IT and R&D concludes Dalal.
9. Collaborative partnerships and increased consolidation
“There will be better opportunities for customers to collaborate with their providers in 2011,” says members of the IAOP. Santos says that global organizations will work with their outsourcing providers to improve productivity, lower costs and get more creative. Such collaborations will be bringing in more innovative solutions in 2011. This year will see the trend of partnerships wherein global companies realize that they need the expertise of their outsourcing provider to survive and excel. You can also expect an increase in cross-border partnerships in 2011, says Varanasi.
Dalal says that the economic conditions in India and the pressure to decrease the cost of outsourced services will bring about an increase in the consolidation of offshore providers. This will give US providers an opportunity to obtain struggling Indian providers and boost their offshore presence.
10. Combo outsourcing plans
This year when organizations outsource services they will choose to outsource in an integrated way as part of all-inclusive strategic plans. IAOP strategic advisory board member Neil S. Hirshman, COP, partner at Kirkland & Ellis LLP, says that organizations will now offshore multiple processes instead of single functions or processes.
Outsourcing customers will develop innovative ways of managing multi-vendor environments and the connection between contingent services. Global customers will look for vendors that are established, experienced and have a global presence in both emerging and established markets says Ossama Nazmi, Chairman of IAOP’s MENA Regional Advisory Board.
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