On Management: Outsourcing slowdown

Uncompetitive costs and dissatisfaction with the business impact - have companies had enough of outsourcing?

by Simon Caulkin, World Business

Tom Peters once exhorted companies to outsource everything except their soul. Given that outsourcing then meant manufacturing and a bit of payroll, that seemed like a typical piece of provocation. But now the idea of a virtual company is a very real one: manufacturing has already decamped to the 21st century workshop of the world, China. Now the extraordinarily dynamic and inventive Indian IT firms have their sights trained on the even bigger prize of services, which today makes up two-thirds of global GDP. Even if some services are unexportable and others, such as financial, are held back by trade barriers, the Indians reckon that virtualising the services value chain - disassembling the parts, exporting them for processing and seamlessly recombining them for final delivery - could be a $3 trillion market.

Some of this is already happening. IT still represents the bulk of the market, with firms offering to take on not just helpdesk, software development and business processes, but the remote management of a company's entire IT infrastructure. Beyond that, though, organisations are increasingly laying off tasks and functions that would previously have been thought of as core.

Financial services firms and information providers are carrying out high-powered analytics in Bangalore; R&D and architectural and other design services are routinely outsourced, as is film animation. In medicine, it is perfectly possible to carry out a scan in one country, send it to a second for processing and a third for another opinion, before delivery back to the country of origin for consultation with the patient. Optimistic providers note that even SME manufacturers routinely globalise their production; why shouldn't modest-sized professional services firms reap similar benefits?

Sign in to continue

Sign in

Trouble signing in?

Reset password: Click here

Email: mtsupport@haymarket.com

Call: 020 8267 8121

Register

FREE

  • Up to 4 free articles a month
  • Free email bulletins

Register Now

Become a subscriber

From £66 a quarter

  • Full access to managementtoday.co.uk
  • Exclusive event discounts
  • Management Today's print magazine
  • Plus lots more, including our State of the Industry Report.

Choose a Package