outsource issue 31 - (Page 86)

Home or Away? More and more companies are investigating onshore outsourcing. Why? Sanjay Chadha reports… Sanjay Chadha 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, Transformational Outsourcing. G lobalisation requires 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 arbitrage benefits. 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 this trend. Industry and economic factors 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 outsourcing model. 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. 86 ● ● ●● www.outsourcemagazine.co.uk p86-87 sanjay APP.indd 86 22/3/13 10:09:13 http://www.outsourcemagazine.co.uk

Table of Contents for the Digital Edition of outsource issue 31

Upwardly Mobile
Keys to Driving Supply Chain Outsourcing Success
Biography of a Carve-Out
Culture and Values
Redefining the Law Firm Delivery Model
Sharing the Glory
Norn Ironman
Breaking the Outsourcing Conundrum
NOA Round-Up
Back from the Summit
Losing the Race Before You Put On Your Trainers
Innovate to Accelerate
Comparing Clouds
People Power
Making an Impact
Home or Away?
Dead and Buried?
So What Now?
The Legal View
Top Ten
NelsonHall Round-Up
Sourcing Sage
Online Round-Up
The Deal Doctor
Inside Source
The Last Word

outsource issue 31