Offshore to Near/Re-Shore

Has the recession led the business to rethink on their offshoring strategy?

The business drivers associated with offshoring like cost savings, shortage of skilled resources and extended timezone all seems to be bottoming out in the short to mid term. In addition the recession that is going on has also created an environment where companies can find new opportunities in getting things done with almost same resources locally.

This could be the right time for the organizations to consider on Near or Re-shoring model as a viable option when the next set of Outsourcing projects are planned.

Outsourcing In Recession

I was in a conversation with a gentle man during my normal trip for work. An interesting topic was was outsourcing during recession. What interested me was the different view points we made and defensse for this from each perspective. Let me give a brief about the two perspectives we discussed.

Perspective 1
It is more feasible for business to opt for outsourcing since that will create higher margins with the same turnover so that the business can weather the recessionary period. This means that several functions that are not core for the business can be outsourced to a specialized provider who can provide tangible value to the customer.

Perspective 2
When the business opt for outsourcing, the first step they do is to cut the employment affecting the purchasing power of the local economy and hence the overall economy. This means that the recessionary process will exdend unless the employment picks up and people are willing to loosen their wallet.

Both perspectives had its merits and finally we managed to identify a common ground on cost optimization. This will include not just outsourcing for the sake of outsourcing but to optimize the existing resources, prioritize on what can be outsourced and then how to out source (A model we discussed was to have the existing employees to be part of the outsourcing process which may also result in creating new jobs on an optimized model).

I am not sure whether this model was tried out in any organization or community and the outcome of this.

Key in your comments & thoughts on this model as it seems to be an interesting area in this time of recession and reduced employment opportunities.

Obama Administration Launches Technology Spending Tracker

People wanting to keep a closer eye on how the federal government is spending taxpayers' dollars have a new resource with the launch of the "IT Dashboard." This new tool is a one-stop clearinghouse of information allowing the American people to track federal information technology (IT) initiatives and hold the government accountable for progress and results.

The dashboard also provides the list of top IT recipients and federal contractors.The details can be accessed from the following URL.

http://usaspending.gov/

I think this will bring more transparency on IT projects with the taxpayers knowing the real situation of each of these projects on various parameters. This will also improve the accountability of CIO's/CTO's of various federal agencies.

Outsourcing - The Way Ahead - Part 1

The current economic situation and the hazy outlook necessitate a major shift in the way outsourcing is handled by clients and vendors. Rather than cost alone, the key factor is going to be a shared-risk partnership between the client & the outsourcing vendor. This requires the outsourcers to grow up to the level of a trusted partner that can understand the current business scenario and also adaptable to client’s changing business landscape.

In this environment, some of the key things a client can do is to structure a deal that is forward looking with sufficient room for revisions, clauses of termination owing to mergers, acquisitions, financial troubles and clauses for transitioning to another vendor in case on any eventuality. There should also be a mechanism to evaluate whether the outsourcing vendor is able to show tangible operational performance improvements to the client business.

Regardless of the current economic turmoil, organizations can take this as an opportunity to transform their business through smart outsourcing deals linked to business parameters.

The New President

Barack Obama's historic journey to the White House reached its successful conclusion on Tuesday when he took oath of office (see the attached video) as the 44th president of the USA. His unbelievable ascendancy to the most powerful office is filled with huge expectations, hopes and challenges. This is exacerbated by the fact that US economy is going through one of its worst periods in modern history.

It is very important for the President to put together a broad economic recovery plan that is inclusive of the main street along with appropriate regulatory control on the Wall Street. Along with the plan, using his unique power of inspiring and energizing millions of Americans to rally around themes, the President should inspire the people to pull out from this economic quagmire and despondency.

With a President who understands and believe in the power of information technology, I foresee a major technology enabled transformation happening in the Government, Healthcare Sector, Citizen Relations, Foreign Affairs, Infrastructure and Energy & Manufacturing. This is going to open up opportunities for organizations that are willing to invest in the US, stay long term and provide partnering approach with various stakeholders.

Let us all welcome the new President and wish him all the success and provide the support required to overcome the challenges he has inherited.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Outsourcing – The Dilemma

Outsourcing, whether it is services or manufacturing is a hot & emotional topic more so with the current economic situation. After considerable debates and wrangling, majority understands that this concept is going to stay for some time. The only issue with this concept is in what form Outsourcing is going to stay. To understand this in detail, let me key in my take on Outsourcing, the current scenario and the future play.

In the formative years outsourcing was based on the fact that products and services can be manufactured /delivered from any location by leveraging on abundant low cost man power & utilizing standard process. Cost arbitrage was the only factor in this scenario. The organizations who jumped on this realized huge benefits and others were left far behind. WalMart is a good case in point for the success along with some of the major Indian IT service providers. This has also helped to increase the global flow of trade where a whole new section of consumer group was created who benefited from this outsourced business. This I would rather call as Outsourcing 1.0 where most of the benefits resulted in lower cost of operations and hence higher profit for organizations and reasonable prices to consumers.

Though Outsourcing 1.0 has resulted in paring down the cost of services / products, the change of life style associated with the new reality and the competition to get resources has reduced the key decision factor of cost arbitrage provided by most of the Outsourced organizations based in different geographies. The major Outsourcers were left with some hard choices to either reduce the cost or move up the value chain and demand more dollars on services. Most of the Outsources have gone for the first option to show / retain the same growth & profit margin and deployed fresh hands that inurn has compromised on the product/delivery standards to a certain extent.

The current scenario demands business transformation along with partnership approach is the key factor for Outsourcing. In the next few blogs I shall share some of my thoughts on approaches that I feel will be a factor that shall change outsourcing in the long run.

The Confession and Its Impact

It was a sad day in the annals of outsourcing industry where a leader who pioneered outsourcing concept came up with a confession statement that shook the foundations of the industry.

Trust, integrity, client relationship along with proven people & domain skill is what matters in outsourcing. The series of events starting with the confession statement from one of the leaders of the outsourcing industry, the first three factors are undoubtedly compromised. The resultant uncertainty has created a major impact with the employees as well as the clients that outsourced the services to that organization. Moreover the investor community who believed and invested in this sector due to perceived transparency factor compared to other sector is literally shaken to the core.

The impact of this unfortunate event may be mitigated if appropriate action is taken with speed by the regulatory authorities. The prime importance is to make sure that the organization in question should adhere to all service commitments to the clients and partners. Speedy actions like appointing people with integrity & credibility to the senior positions, providing near term job security to employees, giving time for clients to do the transition management and provide justice to investors who have lost their savings is a must. The regulations which are already there should be enforced and new regulations to plug the loop hole should be formulated. The essence is to make sure that these incidents will not repeat again by punishing the people who are responsible for these types of acts severely.

I believe this incident will not impact outsourcing industry whether it is carried out on onsite, nearsite or at offshore since the business benefit associated with it is proven and well accepted. The industry will now factor in additional criteria’s like proven corporate governance, intelligence inputs and the integrity of the senior leadership while discussing new initiatives. This incident will also shake up the industry to become more transparent and make the regulators to enforce regulation rather than taking cover on self regulation done by the corporate.