All outsourcers have grappled with how the current economic crisis will affect outsourcing. Evidence is emerging that outsourcing activity will increase.
Few companies or professional service firms made outsourcing decisions at the onset or in the early stages of the economic crisis. As companies try to exit crisis management or adapt to a long-term crisis, however, they are again thinking about more tactical/strategic responses. And outsourcing is back on the agenda.
For example, Business Week, in JPMorgan Chase to Increase India Outsourcing 25% (9 March 2009), reports that JP Morgan “will increase its outsourcing to India by 25% this year to nearly $400 million [and] will also manage the integration of the acquired companies from India to bring down the cost of integrating different information technology (IT) systems.”
This article is consistent with many third-party studies over the last few years that outsourcing is only partly about cost savings. It’s also about rationalizing business processes and freeing up internal resources for higher value work.
In our business, we see the same signs of a shifting mentality. For example, we recently began what we believe is an industry first, outsourcing of an entire research function for a global investment bank (including onsite and offshore teams). This was unthinkable previously. And in the UK, following our announcement of outsourcing the Middle Office of top 30 law firm Osborne Clarke, we have had many inquiries about outsourcing from top 50 UK law firms.
Jaswinder Sohal Commented on March 11, 2009 at 10:31 am
Economic Crisis will Increase Outsourcing and it is certain that India will lead the world to turn around from the economic crisis. Till that happens, in order to maximize profits and increase sustainability the outsourcing providers should look to tier 2 cites like Pune and Coimbatore among other cites where the talent exists and real estate cost are much lower. A key reason to outsource is to save costs, and most discussions on cost revolve around the wages at outsourcing locations coupled with real estate cost of operation. India is a preferred, cost effective and quality output destination for outsourcing and with in India there are multiple cost options based on where the operations are setup. Tier 2 cities have stable supply of talent at manageable operational cost.
Which ever way we look, presence in tier 2 cities will play a major role for companies who outsource the work in India to benefit in these turbulent economic times.