How Does Outsourcing Shape Global Strategy?

How Does Outsourcing Shape Global Strategy?

Regional Strategic Hubs

Regions will develop into strategic hubs based on specializations, domain knowledge, location, cost, local insight etc. As companies takestrategic best-shoring initiativesto minimize risk and leverage cultural and linguistic compatibility as well as benefit from supplier countries that are in the same time zone as their customers

Transformational Outsourcing

Here's what such transformations typically entail: outsourcing specialist entities dispatch teams to meticulously dissect the workflow of an entire human resources, finance, or IT department. The team then helps build a new IT platform, redesigns all processes, and administers programs, acting as a virtual subsidiary. The contractor then disperses work among global networks of staff ranging from the U.S. to Asia to Eastern Europe.

Selective Outsourcing Arrangements

We will begin to see an increasing number of one-off outsourced project arrangements as opposed to full outsourcing deals

Redefining Cost Optimization

The massive cost saving on labor experienced by early adopters of off-shoring are beginning to diminish rapidly as outsourcing resources grow in competence. Clients are beginning to realize that cheap labor is the LEAST of the value proposition. McKinsey and Forrester report that clients are discovering up to 30% cost saving by process optimization and standardization, whereas labor arbitrage saved only 9%. As a rule of thumb, rates will only go up in the medium to long term; therefore it is important for us to realize that outsourcing needs to be seen as a VALUE DRIVER in a more holistic manner. If you look at outsourcing as just a way to save money, you miss half the point.

Opposition will lessen

Political opposition to outsourcing will lessen in time. It will be seen as the new accepted model of business; an extension to the supply chain, no different from importing high quality parts for assembling a car at a lower cost

Where will future innovation come from?: The service provider community will, in the very near future become pivotal in providing innovation to their clients

Businesses are beginning to Re-assess their identities: in the faceof such fragmented supply chains, businesses are becoming more focused on their core operations and redefining their primary roles. For instance, automotive giants outsource everything from parts, design, assembly and service they realize that their core function is that of a marketing entity for their products. Businesses are now becoming purely their own CORE OPERATIONS, with all other auxiliary non-client facing functions seen as non-defining in this regard

Off-shoring will eventually be the gateway to new markets: Best-shoring andcaptive facilities will eventually translate into greater penetration into these new markets for producers and suppliers, eventually opening up new markets

Co-development:

Outsourcing entities will adopt a collaborative approach and at their zenith, begin to develop new products, services offerings and cooperate on internal functions such as product R&D, market intelligence and so forth

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