The last 18 months have seen large, new outsourcing deals grind to a halt and organisations question the reasons and results behind existing agreements. But companies are now moving forward with renewed trust in the stability and growth of economic markets, leading to increased outsourcing activity. The slowdown of the past months has led to a re-evaluation of how outsourcing benefits businesses. Five years ago, outsourcing was the fashionable option behind many cost-cutting ideas. Now corporations have woken up to the fact it is so much more than just a cost-saving measure and the extent to which outsourcing can improve their business operations is much more under their control.

So what’s changed?

The recession of 2008-09 prompted people and companies to take stock and ask why, what, how, where? Why do we outsource? Why do we offshore? What do we actually get in return? How do we really benefit? How, if at all, do our customers benefit? Where does that leave our outsourcing options in 2010?

Firstly, regardless of how, what, why or where – outsourcing is back… it has weathered the economic storm and businesses will return to using outsourcing to recapture innovation in 2010. However, this does lead us to ask why do we outsource?

Five, even 10 years ago, companies outsourced for one reason – cost reduction. Outsourcing was viewed as the light of the end of tunnel for reducing expenditure. It now seems this was a short-sighted view. From 2010 onwards, with new deals signed and new management potentially in place in many companies, everything is screaming return on investment (ROI). Clients are demanding quicker, more transparent results and this development will shape the majority of future outsourcing deals. A complete offering is what companies now expect. The end of 2009 and the early months of 2010 were witness to a significant increase in activity in the outsourcing arena, so much so that some major players in the IT and BPO sector have realised that a full ‘right sourcing’ offering is invaluable. For example, HP purchased EDS, Dell acquired Perot Systems, Xerox bought ACS, and Xchanging PLC acquired Cambridge Solutions. It is not just about local presence, organisations now realise they need to offer clients every option possible. Each of the above organisations cemented not only a European presence, but in most cases, a global one also. Thus allowing on, off and near- shore offerings to clients.

Offshoring

And so, to the future. What is on the horizon for 2010 and beyond?

Offshoring to India was once the thing to do. The world is now a smaller place; customer satisfaction is priority, ROI is vital, and transparency is key to securing any (long-term) deal.

India remains a hotbed and a focal point for offshoring but with more options available, companies are increasingly asking what the best choice is for their needs. And there is a choice. The world has opened up and delivery centres are common in Eastern Europe as well as Asia. Brazil is now a major candidate for consideration, as are numerous other locations in Central and South America. These rising geographies will move market share away from the traditional outsourcing major players, such as India. ‘Offshore players will continue to expand and set up operations in new geographies, taking a share of an expanded pie,’ says Atul Vashistha COP, International Association of Outsourcing Professionals (IAOP) board member, and chairman, Neo Advisory & Neo Group.

As new destinations emerge, the competition among outsourcing providers will intensify, leading parts of the world – particularly the BRIC nations – to differentiate themselves through professional certification, such as the COP designation, and training and education programmes. ‘Increased competition from emerging market providers will also drive a focus on services differentiation, bundling of services and greater intimacy with customers through outsourcing relationship management (ORM),’ says Matt Shocklee, COP, president and CEO of Global Sourcing Optimisation Services and IAOP US Ambassador.