The old-guard outsourcers look to offshoring to stay on top

While the growth of India based outsourcers may be shocking to some, the major players in the outsourcing market have been busy increasing their offshore resources to stay competitive, with many U.S. companies creating their own offshore teams in India and elsewhere.

Accenture announced its plans to double its offshore resources in India, China and the Phillipines back in January. EDS Chairman and CEO Michael Jordan recently emphasized the growth of the IT services sector in the Middle East following the establishment of an EDS IT joint venture in Abu Dhabi in February. Unisys has begun to set up application development outsourcing in China. And Dell, Cisco, Microsoft and Capgemini are all increasing India-based staff.

However, with a ready local supply of cost effective talent, Indian companies are not outsourcing their IT at anywhere near the rate of U.S., British, and other countries, according to a story in HindustanTimes.com.

A recent article in U.S. News and World Report, headlined “Invest in corporate America. Just don’t work there,” highlighted the shift in workforce within U.S. companies, where the growth in workforce is in foreign workers. Companies that do not remain cost-competitive will lose shareholders, market share or both. They have no choice but to adapt and either outsource or create their own internal offshore teams. The big outsourcers are no exception.

So what does this mean to prospective outsourcing clients? Offshore resources can add to the management challenges of working with an outsourcer since distance, culture and time zones can complicate working relationships. You can no longer decide to trade cost advantages for potential offshore challenges by using an offshore company vs. working with a traditional outsourcer and expecting to pay a little more but get more local resources. Anywhere you look, there will likely be a component of offshore resources in the mix. The good news is you will get a competitive price. The bad news is that you will be forced to deal with the additional management challenges.

The offshoring trend is moving from a customer driven choice to a standard across the industry. This will increase the importance of management and governance of IT outsourcing relationships. Companies deploying their own offshore teams will need professionals with the management skills to work with widely dispersed global teams, and the outsourcer will need professionals with similar skills. Companies using an outsourcer will need professionals with a different skill set – a professional at managing outsourcers. And this will have to include the contracting and operational governance role as well as the global team management role. We are already seeing a growth in management professionals who specialize in procurement, contracting and managing outsourcers.

I think we are not too far from a time when we will no longer be using the term offshoring. Not because of its decline as a mechanism for staffing, but because it will have so proliferated through every aspect of business that it will not longer be a distinguishing characteristic. It will just be part of the global economy.