Business Outsourcing

Outsourcing is the word which evokes strong emotions. The trend has been readily accepted by countries like India and China which have become hubs of outsourcing, especially in sectors such as IT, web development, ITES (IT enabled services) and back-end jobs in the BFSI (Banking, Financial Services and Insurance).

Companies from across the world, ranging from Fortune 500 companies to small and medium sized firms, have flocked to India, China, Indonesia and other such Asian nations to outsource crucial services, attracted especially by the cost savings, operating costs rationalization and eclectic talent pool that these countries offer.

This trend picked up steam especially in the late nineties and since then has seen a steady albeit controversial rise. Voices against the growing trend for outsourcing have been equally strong, and the issue has taken crucial political overtones in the US and Europe, where the problem of lack of jobs have often been squarely blamed on outsourcing.

With the economic meltdown now beginning to hit below the belt, the voices against outsourcing are likely to get stronger in 2009 as jobs are disappearing and downsizing is happening across the entire spectrum of industry and services sectors, lying off hundreds of thousands of workers.

Companies on the other hand, are scrambling to cut costs at whatever corner they can in a desperate bid to survive the recession. In such a scenario, one needs to take a comprehensive and objective view of the picture to determine how we can collectively emerge out of this mess.

Will putting a curb on outsourcing prove to be a panacea for all ills and will it actually prevent jobs from disappearing? The answer is NO. If companies are not able to control costs, they will not be in a position to continue operations at reasonable levels and that means, the jobs will continue to be put under the chopper’s blade. Putting curbs on outsourcing will actually further prevent companies from looking for alternative measures to survive the downturn and if the company goes down, so do its job opportunities.

Countries such as Philippines, India and China are still proving to be the only rays of hope in this all pervading gloom, clocking annual growth rates of 6-8%. Here is how they can help recession battered companies recover:

By helping cut costs

This is the biggest worry of the firms hit by recession. Outsourcing can help companies in this endeavour by providing quality services at a fraction of what would have cost, if the companies had done the same work in house. The reasons are pretty simple - no more infrastructure costs and no more training and other HR related costs. The money saved can be utilized in strengthening the marketing or can be put back into the core operations or can be held as the reserve.

By providing competent services

The jobs which companies typically outsource because of their non-core nature are actually core business for the outsourcing vendors so they are able to provide the required focus and the quality because of their well trained and experienced staff and proven working models. Not that the companies themselves can't reach the same quality levels over a period of time but the effort and resources required are not worth it in these depressing times.

By providing fresh perspective

New mindset and fresh ideas coming out of different socio-cultural milieu of the people working on the project may be just what outsourcing company needs to beat the economic blues. This especially works in case of certain specialised services, such as outsourcing of web development work where novelty is the name of the game. Maybe that’s why outsourcing of web services has not been affected by the ongoing recession.

By swift execution of the jobs

More often than not, non-core (but essential) works suffer from bureaucracy. Core business always gets the priority and other jobs tend to get postponed for one reason or other. This might hurt in the long run. But when the same jobs are outsourced, they generally won’t go off track or get derailed due to internal politics or conflicting IT priorities.

One example is web development work of say, some construction firm. Having a web site may not be their priority but not having one or not having a good one will certainly hurt. So outsourcing web services work makes sense for such companies.

The outsourcing debate is a long and contentious one and will become shriller in coming days but one thing is clear - outsourcing can actually prove to be the life saver for a lot of companies which eventually will help them buck the slowdown. Once they emerge from the recession, the jobs will be back again where they were. A bust is typically followed by a boom and more jobs will be up for takes in times to come. The challenging times now requires us to be pragmatic, not emotional about outsourcing.

By Param Shobhit

Labels: bpo, business outsourcing