outsource issue 31 - (Page 86)
Home or Away?
More and more companies are investigating onshore
outsourcing. Why? Sanjay Chadha reports…
Sanjay Chadha is an IT sourcing management expert, managing the Global Sourcing Office for a
large US financial services firm. He is a columnist for Outsource online and recently published a book,
companies to compete
globally, and offer better
products and services that
are appealing to customers.
In several industries, global outsourcing
today enables the business value chain,
providing a mechanism for corporations to
achieve their globalisation objectives while
keeping their costs manageable.
Y2K served as the growth engine for the
offshore outsourcing industry. Demand was
largely driven by a need to access flexible
capacity at a lower cost. The trend has
been significant over the last decade as
offshore providers introduced new services,
improved quality, provisioned flexible
capacity and continued to offer labour
Today, several factors are indicating a
growing interest in domestic outsourcing.
Domestic outsourcing means having
work done in the same country by a
different company. Within the USA, for
example, development and operational
centres in states like Montana, Alabama,
Detroit, Wisconsin, Louisiana, and Maine
are emerging and seeing increasing
investments. Offshore providers are also
recognising domestic outsourcing as an
opportunity and are investing in centres
staffed by US citizens. The “offshore” pitch
is changing to the “right shore” pitch as
clients look to balance cost with better
quality of delivery.
Several factors are contributing towards
Industry and economic
Rapid environment changes are
prompting demand for agile, adaptable
products that solve business problems
and have faster time-to-market. Taking
a rigorous process-centric view and
translating development requirements
and architectures to remote teams
may significantly slow things down. In
several situations, these expectations are
best perceived to be met by domestic
destinations with well-integrated, highly
collaborative, and business-centric teams
working on similar goals.
Innovation becoming mainstream.
Offshoring continues to offer strong
execution skills. However, generating
viable innovation has been slow. In several
situations, the “connect” required to
innovate may be best when services are
being delivered in closer proximity.
Government incentives and support.
Several state and local governments are
now offering incentives like reduced tax
rates, lower capital requirements, and
improved entity structures to encourage
corporations to make domestic investments.
Immigration policies are tougher
today that they were ever and are
favouring increased usage of the domestic
The cash deployment factor.
The last four years of recession and an
uncertain economic environment focussed
corporations towards conserving capital
by making investments in improving
productivity and generating operational
efficiencies. These investments are now
reaching the point of diminishing returns.
Companies today are flushed with cash
and their focus is starting to shift towards
increasing their top line. As the economy
improves and hiring starts to grow,
there is an increased probability that
corporations will invest cash to generate
more returns. The demand generated as
a result of these investments may provide
a boost to domestic establishments as
@60North80West: After decades of offshoring and outsourcing America has been gutted. This is why your economy is not recovering.
p86-87 sanjay APP.indd 86
Table of Contents for the Digital Edition of outsource issue 31
Keys to Driving Supply Chain Outsourcing Success
Biography of a Carve-Out
Culture and Values
Redefining the Law Firm Delivery Model
Sharing the Glory
Breaking the Outsourcing Conundrum
Back from the Summit
Losing the Race Before You Put On Your Trainers
Innovate to Accelerate
Making an Impact
Home or Away?
Dead and Buried?
So What Now?
The Legal View
The Deal Doctor
The Last Word
outsource issue 31