Global Sourcing at the Crossroads

The meltdown has given the IT-BPO industry a whole new perspective where “more for less” is the worldwide mantra that customers are wont to negotiate with service providers. A major game-changer of sorts, would necessarily mean a change in business models, impacting mode of delivery and a more collaborative approach amongst partners. Worldwide, customers are focussed on reducing BPO outsourcing contract costs to improve bottomline. Though, revenue will still maintain a positive momentum, but profit margins may take a beating and the BPO ecosystem would need to re-engineer to adapt to a changing environment.

  1. Decreasing role of labour arbitrage: Progressively we are likely to witness a reduction of dependency on labour and more reliance on reusable components. This will essentially standardise service offerings as customers would also negotiate heavily to cut down costs, discretionary spends and demand additional services.
  2. Increased usage of SaaS / platform strategies: Drastic reduction in costs, if is to be an industry-wide trend, would necessarily mean sharing of platform and IT infrastructure. Recent studies indicate that BPO customers are open to share service providers’ platform with other customers. This would lead to providers proactively building capability around specific key horizontals / industry (e.g BFSI travel, transportation, logistics, retail)
  3. Increased M & A activities: As delivery pressures increase – more for less, at a very fast paced turn-around-time, vendors would be induced to go for inorganic growth. The market is likely to witness a flurry of M & A activities as new skills and infrastructure would have to be acquired, to bridge the service gap.
  4. Emergence of Value Analytics: This will be a major game-changer. Service providers, if they want to move up the value chain, would need to concentrate on providing high end analytics. This will be the next big differentiator as such service offerings, enables a vendor to analyse key business metrics and assist in customers’ transformation efforts. Customers expect the service provider to delve deeper into business processes and identify wastage, gaps and redundancies to make it more agile and efficient.
  5. Costs continue to be king: Due to stringent cost cutting mechanism being universally followed, those vendors that are able to demonstrate positive ROI in the short and medium terms, would most likely get the nod.

NILF 2010 has a major focus on the future of outsourcing. Please register for the flagship event and be there as industry wide thought leaders dissect each piece and deliberate on the strategies that are likely to work. Be there anyway!

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