Which are the clear signs and trends showing us about expectable Outsourcing evolution path over the next few years?
If we look at what Outsourcing has been over the last decade and how the market is evolving in general terms, we can list the following facts that somehow unveil certain trends which will further develop:
- The internet and Cloud-based IT Infrastructure Offering Portfolio has grown exponentially in size, security, redundancy and competitive pricing benchmark in a way that it is increasingly rendering ineffective the acquisition and maintenance of on-site physical IT Landscapes.
Now a small business can make use of computing and storage resources that were unthinkable just 5 years ago, enabling them to compete with considerably larger companies purely based on innovation capacity as well as time to market (smaller companies tend to be more agile with regards to creating and delivering innovative solutions than large corporations).
It is expectable that Cloud-based IT landscapes will be adopted by companies while outsourcing their setup, configuration, and maintenance to remote 3rd party expert providers.
- Developing markets, mainly in South East Asia (SEA) are expected to enter accelerated development cycles that will use Outsourcing to gain momentum while assuring best in class know-how.
Japan is a country with an aging population which is expected to be drastically reduced in numbers over the next 50 years. The country has set itself in motion towards expansion within the SEA region by means of investments in promising growing economies like Indonesia, Thailand or The Philippines.
These endeavors generally imply a three-stage outsourcing endeavor where to begin with the local government will Outsource some infrastructure project to a Japanese expert company (which assures high quality standard and state of the art technology) and then the Japanese company will partner with local 3rd party companies to provide local labor which in turn will be trained and coach by the Japanese experts. Over the last stage, the Japanese company will initially keep a 5-year maintenance contract but the service will be outsourced to the local companies which have benefited from training during the implementation phase. This is being largely used towards infrastructure development (buildings, Hospitals, bridges, tunnels, other) since one of these countries main problems pertains the fact of having the scarce infrastructure.
- As these countries start to create better infrastructure, the fact of having young populations and low costs of living which imply low labor costs will further promote Manufacturing and Pharmaceutical businesses to move to the SEA.
As an example, by a sheer scale factor, India represents a colossal potential regarding R&D outsourcing for the great majority of large corporations over the market span.
Latin America is yet another region that currently bears a huge potential for Outsourcing due to both the unstable political situation, not favorable for the creation of strong competitive countries, yet with a vast amount of HR expertise that is not able to find proper jobs and careers locally. In this case, the point is not to have large corporations setting a larger local footprint, yet have either expert freelancers or small companies delivering high-quality services from there to the world.
- Given the previously mentioned the trend is for Outsourcing regarding low-end services to stabilize while Outsourcing regarding business-critical functions to exponentially grow.
- Oil prices are expected to rise significantly and that alone will lead a part of corporate costs (namely logistics and consumables) to also grow, therefore reducing the FTE (Full Time Employees) impact in the Profit and Loss matrix will become vital for large corporations to survive (and there a limit to “cutting heads”), therefore Outsourcing is the way out that assures maintaining or even raising the expertise level without costs associated with FTEs.
- Cost optimization will also drive Outsourcing Services Providers since their revenue from Outsourcing contracts will represent more work for less pay with tighter SLAs that demand flexibility and efficiency gains.
As a matter of fact, even over the last 5 to 10 years, it has become increasingly common to find the requirement for efficiency gains in all major Outsourcing contracts. That means that if you are rendering a service in Outsourcing over a given context, it is only natural and expectable that over time you get better at it, therefore being able to both reduce the number of errors and incidents as well as requiring less effort to deliver the service, hence reducing the inherently associated price tag.
- With regards to the previous item, about efficiency gains, things have in fact already reach (in some cases) the tipping point, meaning the only way to further produce and or reflect them is by largely adopting and implement Automation and even AI. So, the other foreseeable evolution pertains the Outsourcing of a growing number of services towards fully automated AI-powered providers.
We are therefore on the brink of yet another “revolution” in the Outsourcing landscape, stay tuned.