Outsourcing looks closer to home

As recently as 10 years ago, outsourcing was mainly seen as a cost-cutting opportunity, says Venkatesh Roddam, chief executive officer of Satyam BPO, based in India. “For many, there was a pure focus on being cheap. But that wasn’t a long-term sustainable proposition.”

Now outsourcing is evolving, and it doesn’t necessarily mean moving to one location from another.

Indeed, as the world becomes smaller, companies are no longer considering moving offshore as the most cost-effective and efficient way to outsource, but instead are asking: what does the business demand? This transformation means outsourcing is seen as less of a crutch for the technically deficient or work-force challenged company, and more of a strategic tool.

“It is becoming a matter of looking at the world as a marketplace of skills and products and deciding what gets done where the best,” says Mr. Roddam, of Satyam, which was the top-ranked business-process outsourcing company in a recent survey of outsourcing satisfaction, by Clearwater, Fla., based Brown-Wilson Group.

Brown-Wilson Group’s annual Black Book of Outsourcing survey aims to identify the 50 best-managed global outsourcing vendors and identify industry trends based on responses to an Internet survey of satisfaction with outsourcing suppliers. The 2008 survey, conducted January through April, ranked vendors according to responses from about 24,000 executives and others involved in outsourcing decision-making.

One trend indicated by this year’s Black Book survey, says co-author Doug Brown, is the growth of U.S. based offices for Indian outsourcing firms that can “provide closer proximity and to enable the outsourcing firm to draw from the local talent pools.”

Rising wages in India along with the U.S. dollar’s decreases against the rupee, are making it more expensive for some Indian companies to maintain operations solely in India.

It’s a key illustration of why outsourcing models based on cheap labor and markets are hard to sustain, says Satyam’s Mr. Roddam.

“Now we understand that we need to be present where the client is,” he adds. “[And] we have to ask; what can we do in terms of increasing quality and productivity standards.”

This recent movement out of India, is now starting to lead back to U.S. shores. In fact, the Black Book survey indicates a growing re-appreciation for U.S.-centric firms as the top five rankings went to U.S. companies; Hewlett-Packard was the top ranked outsourcing vendor overall, and Perot Systems was second.

Unisys, which climbed from 47th place in 2006 to place fourth overall and third among IT outsourcing providers in this year’s Black Book survey, saw much of that turnaround after it began a big investment in large-scale globalization, says president of global outsourcing and information services Tony Doye.

While that’s helped the company gain the expertise it needs to seal big deals overseas, he says, “some of our U.S. clients are now insisting that work is done on-shore.” Much of this he believes is due to dissatisfaction with outsourcing services, as rates escalate in India and there’s a battle for talent there. In addition, he’s observed a higher comfort level of doing business in the U.S.

According to the Black Book Survey, Latin America and Central and Eastern Europe suppliers saw the highest growth in their outsourcing industries, along with a rise in client satisfaction. But the UK and Western Europe are viewing the U.S. as its third most popular destination for offshore outsourcing after India and China, the survey found.

Companies are looking for outsourcing suppliers who demonstrate experience or expertise, that’s closely aligned with their business model.

“Health-care industry buyers want their vendors to have healthcare experience and consultants just as logistics companies are showing greater satisfaction and customer experience by vendors who understand their distribution systems” Mr. Brown wrote in a summary of the Black Book survey.

But Mr. Doye attributes a large part of Unisys’s outsourcing success over the last couple of years to the line: “small enough to care and big enough to deliver.”

“What’s important,” he says, “is balancing the fine line between providing smaller services and being efficient on a large scale.”


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