Integreon

The annual Black Book of Outsourcing survey results were recently released. Beyond the rankings, authors Douglas Brown and Scott Wilson report on several important findings in their “state of the industry” report. (For the record, Integreon scored very well in the rankings; see our Black Book press release.)

We think the most striking finding is what the authors calls reverse outsourcing:

“Outsourcing is taking on a new twist. Rather than U.S. jobs going to India, the latest evolution of outsourcing is moving in reverse, with India’s leading service providers opening offices on Main Street, USA. The reverse outsourcing development is too new for Indian companies to point to actual cost savings yet, but moving front office processes closer to the client is fast attracting buyer interest. Major suppliers are responding to the demand for enhanced, locally delivery customer service.”

Several Indian outsourcing firms have established and grown US presences, not only for front office marketing and sales, but also for delivery of services as well. TCS, Wipro, Satyam and HCL are notable examples. Outsourcers have multiple reasons to adopt “dual shore” strategies. One is purely administrative, linked to visa challenges.

The bigger and more important reason is the realization that the best customer service requires a combination of an offshore and onshore team or, in some instances, pure onshore teams. In Integreon’s view, supported by the Black Book findings, firms with only offshore operations will find it increasingly difficult to provide world-class solutions.

The authors also comment on what buyers value. For client segments in the early stages of adopting outsourcing, for example legal process outsourcing (LPO) such as legal document review, “client relationship and cultural fit and trust and end-to-end service” is key. This may be because the providers may not have differentiated themselves on service delivery in early stages and cultural/relationships issues become proxy for potential performance.

For more mature segments – document process outsourcing (DPO) or knowledge process outsourcing (KPO) such as research and analytics – “innovation and deployment and comprehensive end to end service” are the key to successful relationships. This finding adds to the already overwhelming evidence that as outsourcing clients gain sophistication and develop increasingly high expectations, providers must deliver more than simple cost-arbitrage. Innovation, cultural fit, and domain expertise are among the critical success factors for the future.