Globalization of Outsourced Services Industry

The outsourced services industry is morphing into a truly globalized industry – and sooner than later. This acceleration is fueled by the current recessionary conditions in the traditional markets of demand for outsourced services. I believe this is a desirable by-product of the current downturn.

Large service providers – both of multinational and Indian heritage – are challenged to achieve growth and profitability in their current large markets. However, if you carefully review the results of Accenture and IBM vs other (read: Indian heritage) providers, you will find that there is a much higher degree of resilience reflected in their results despite the current gloom and doom environment. What is that attributable to – clearly the good old principle of diversification of their books of business. Not all economies are reeling under the same degree of pressure, and on top of that, the emerging economies are highly under-penetrated (read: immature) in their services outsourcing. All in, it makes perfect sense for providers to look elsewhere when faced with challenges in the more developed markets hence their focus on markets such as India, Brazil, the Middle East, Central Europe, China etc.

Additional flavor of this globalization trend is that it is bringing home the point – one size doesn’t fit all – very emphatically to the providers. Each market has different nuances, and it’s not just a cost arbitrage (off-shoring) play. Markets are at different points of maturity in their trajectory of services outsourcing, not to mention very different economic growth rates, cultural and linguistic factors, regulatory scenario etc., thus requiring differing winning themes in creating healthy outsourcing demand. The value propositions range from variable capacity on demand, investments from providers for supporting high business growth needs, specific service delivery capabilities to increase speed to market or service delivery performance, innovative solutions, commitments to allow predictability of cost and performance over time, releasing management bandwidth to focus on core business, transferring the headache to service provider for delivering competitive services on a contemporary infrastructure, multi tenancy platform based solutions, etc or any combination of the above.

I believe this trend will compel the service providers to enhance the maturity of their service offerings and capabilities, thereby contributing to the overall higher level of industry maturity and globalization. Who said everything related to the current business environment is gloomy?

About the author

Dinesh is a highly experienced and well-respected advisor in the outsourcing industry with more than 23 years of experience in management consulting and outsourcing. He works with enterprises to craft sourcing strategies, structure and negotiate complex sourcing transactions and design and implement sourcing governance organizations. Prior to joining ISG, Dinesh worked with Infosys and Accenture, where he led large transition programs and consulted on IT strategy and implementations, business process-reengineering and operational improvement programs. He is a published thought leader and a regular speaker at industry conferences. Dinesh manages the ISG India Business.