Is outsourcing on its way back?


What is the relation between reopening mines and outsourcing activities? What is the impact of recent political decisions on the outsourcing space? Will board members be influenced?


About a decade ago many companies started to outsource their day to day activities to countries like India to be able to gain cost efficiencies and leverage from the potential labor force over there. Potential processes were IT maintenance activities, large IT project activities and Business Process Outsourcing activities like manual entry and call centre processes.

With the rise of emerging markets more countries came into the picture as potential partner countries, like Malaysia, Sri Lanka, China, the Philippines and even Taiwan or Korea. From an US perspective these were the countries to look at and with the increase of activities also the full costs did rise time over time. Many outsourcing companies in India, as an example, struggle with the retention of their staff and the high inflation rates and increase of staff salaries.

With these movements also European low wage countries came into the picture and were perceives as an interesting alternative with several advantages like a smaller culture gap, high educational levels and thus improving quality levels in relation with the per hour cost. Companies like Microsoft and Nokia opened centres in Rumania and Poland for these reasons.
With the current economical climate and the political changes in the global market place the question arises what happens next? Although a completely different market environment (so it seems), the US are reopening some of their commodity mines because of the lack of availability of minerals in the world market. As a consequence market prices are risen and decisions are taken.

An important discussion, and that is different from the past, is the dependency on political decisions. The impact of recent decisions on special taxes (i.e. in Hungary) is making board members aware of the vulnerability of their operations. In the case of Hungary, certainly ING is not able to move away their operations to other countries in a split second. They will suffer from a political decision and what can they do about it?

These changes will have an impact on future outsourcing decisions as well, I am 100% certain of that. It will maybe even drive companies back to their own nation, which they feel can be influenced much easier then a far away local government.

Source: GLG

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