Despite the supercharged politics surrounding the issue, outsourcing IT offshore has become a fact of life, and it’s growing quickly. Why? Because despite the difficulties, offshoring can provide huge benefits in terms of productivity, prices, profits and wages—an irresistible combination in a highly competitive world. A natural evolution of how the global marketplace operates today, offshoring is on the way to becoming a mainstream business. And the future for outsourcing looks even brighter.
Still, offshore outsourcing brings with it a wide variation in costs from country to country, as well as significant risks—geopolitical, economic, legal, cultural, and IT infrastructure and competency—and companies making decisions about where to outsource must take these into account. The goal of this whiteboard is to provide a thorough country-by-country analysis of the current outsourcing market, and to point out where to find the best opportunities for a variety of services. The result is the Global Outsourcing Index, which rates each country on the basis of a combination of relative cost, risk, and market opportunity. And because the world is changing so fast, the whiteboard also looks at where offshoring opportunities can be found in the future.
The trend toward offshore outsourcing is a lot more complex than simply seeking skills and resources in the lowest-cost locations. The driving forces in the IT outsourcing market are quality and speed to market, not just cost of services. A new wave of outsourcing is allowing companies to acquire reliable IT quickly, in order to deploy specialized services, and ramp down easily when these services are no longer needed.
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At the same time, offshoring is pushing the world beyond the information economy and toward a global knowledge-based economy. Technology enables knowledge to be shared quickly throughout the developed and developing world, allowing a variety of regional specializations to arise.
These trends are conspiring to bring further changes to the global outsourcing market in the next decade or so. First of all, consumer demand and spending power in the emerging economies is growing more quickly than expected. And as they grow in strength and stability, the risks of outsourcing can be spread further as companies have a wider variety of geographic locations to choose from.
In the future, many companies will not outsource to a particular country at all. Instead, they will turn to large multinational corporations with access to a variety of resources and expertise across the globe and the ability to spread risk. As these one-stop shops grow in size and skills, they will gain a significant competitive advantage over even the strongest individual outsourcing markets.
Mark D. Minevich ([email protected]), a globally recognized technology leader and international strategic advisor, is principal at Going Global Ventures Inc., a U.S.-based international consulting and venture advisory firm.
Frank-Jürgen Richter ([email protected]) is president of Horasis: The Global Visions Community, a strategic advisory firm that develops scenarios related to issues of globalization.