Companies to seek value, restart deals and hiring
Companies will return to using outsourcing to recapture innovation and provide flexibility in 2010, versus simply saving money, but global economic uncertainty will continue to impact the industry, according to year-end predictions by the International Association of Outsourcing Professionals (IAOP).
“Coming off a year of tremendous pressure, the outsourcing industry is expected to enter the next decade with positive signs of rebounding,” said IAOP chairman Michael Corbett. “As companies recover from these tough economic times, outsourcing will enable them to emerge as leaders in the new global economy.”
Here are the top 10 trends to watch for in 2010:
1. Delayed deals get the green light
The economic downturn over the past 12 to 18 months put many outsourcing deals on hold. Companies are now forging ahead with renewed confidence in the stability and growth of economic markets.
2. Desperately seeking value
The tremendous pricing pressure on outsourcing deals renegotiated in 2008-09 will lead some companies to realize that deep pricing cuts have damaged relationships and the business value that outsourcing brings. Providers and customers will re-negotiate contracts more collaboratively to regain innovation and flexibility, and enhance total value.
3. Flexibility to get out of contracts
With uncertainly still surrounding the economy, companies will hesitate to make long-term commitments with outsourcing service providers because of the fear of the unknown.
“The looming economic uncertainty will lead customers to seek shorter term contracts, inflation indexing, currency exchange protection and volume band relief,” said Jagdish Dalal, IAOP’s managing director of thought leadership.
4. Uncertainty leads to consolidation
Global economic uncertainty, currency fluctuations and other market forces will encourage increasing levels of mergers and acquisitions on a global basis, particularly among service providers.
“This consolidation of outsourcing providers will drive higher value services and continue to put pressure on other players to be more strategic in their offerings,” said Dalal.
5. Outsourcing hiring return
Expect to see growth in new graduate hiring in emerging outsourcing locations as well as wage increases of eight to 10 per cent in India and many other Asia Pacific locations, while North America and Western Europe will see much smaller raises.
6. New outsourcing destinations emerge
Rising geographies in Central and South America will take market share away from traditional outsourcing locations, such as China.
7. New destinations differentiate themselves
As new destinations emerge, the competition among outsourcing providers will intensify, leading parts of the world – particularly the BRIC (Brazil, Russia, India and China) nations – to differentiate themselves through professional certification and training and education programs.
8. Tooling up with technology
Companies will increasingly make use of advanced management practices, tools and technologies – such as outsourcing relationship management and cloud computing – to provide improved value and operational flexibility and performance.
9. Social responsibility
Outsourcing practices will continue to be impacted by increased environmental awareness and social responsibility. The industry will be called on to step up its role as a leader in corporate social responsibility globally.
“Companies will need to develop new innovative technologies to deliver the sustainable products that consumers want and also look more broadly at the impact of their outsourcing actions on a global basis,” said Julia Santos, chair of IAOP’s global human capital chapter.
10. Political shifts
Increased government regulations and the resulting need for compliance will affect outsourcing in the coming year.
“Global businesses will become increasingly aware of the new regulations and seek to establish better relationships with key opinion leaders,” Santos said.
