The future of outsourcing

Mumbai: What is the future of outsourcing? In its report, The Future of Outsourcing, London-based independent market analysis firm Datamonitor examines what lessons from the past the new wave of outsourcing can learn from and what will drive its success going forward.

For one, notes the report, outsourcing is increasing its reach in terms of vertical industry reach as well as geographic scope. Whilst the firms investing in it are wide-ranging, their individual needs are all similar in that they need to reduce overheads as much as possible. Yet, the outsourcing phenomenon is rarely understood.

The report examines outsourcing in automotive, energy, healthcare, technology and financial services markets. Some points highlighted include:

Sales force outsourcing common practice within the pharmaceutical industry Sales force outsourcing is being used as a tactical manoeuvre by pharmaceutical companies, using the services provided by contract sales organisations (CSOs) to meet their short-term and longer-term. The benefits include:

• Speed and efficiencies: CSOs can quickly build sales forces or provide additional sales representatives. This is useful for pharmaceutical companies to adapt to sudden changes in their sales force needs
• Expertise: Using a CSO can provide pharmaceutical firms with sales force expertise in new geographic or therapeutic areas they wish to expand into, but do not have the expertise in
• Avoiding capital outlay: For some pharmaceutical companies, particularly smaller ones, such an investment may be too risky or they may not have the upfront capital required. Outsourcing the function to a CSO offers a viable alternative.

Best-shoring is the latest emerging strategy
Outsourcing is continuing to grow across all vertical markets, and contact centres are no exception. However, Western domestic contact centre outsourcing is slowing in the wake of new business realities and offshore locations providing high levels of customer service at a lower cost. Many investors in the US and Western Europe have adopted the 'nearshore' model as a way of moving their operation to cheaper locations. Simply put, they locate their facilities in relatively close proximity to the markets they service. (E.g. from the standpoint of US investors, Canada and Mexico) However to derive maximum profits from outsourcing, many are now using the 'best-shoring' strategy - tailoring specific customer care needs to locations that are best suited for these functions. It allows the investor to save on the cost of domestically sourcing the work, while at the same time removing the inflexibility of using only one offshore location.

For example, many outsourcers are now locating administrative-to-mid level customer care in offshore locations including India, Argentina and the Philippines (which may account for 60 per cent to 70 per cent of total call volume), while locating the high-end / value add work in nearshore locations such as the Czech Republic or Egypt.