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Outsourcing - no longer a choice: Corbett

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CIOL Bureau
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BANGALORE: "Outsourcing is no longer an optional tool. For competitive success and innovation companies will have to increasingly look at forming long term relationships with strategic partners in the outsourcing game. Not only is outsourcing here to stay but as companies are fast realizing its becoming an integral part of their management activities," said Michael F Corbett and Associates president and CEO, speaking on the first day of the 2003 India Outsourcing Summit being held in Bangalore.



Speaking on the topic of 21st Century Outsourcing, Corbett elaborated that understanding the outsourcing lifecycle of strategizing, implementation and management was important for the success of any company considering outsourcing in the long run. He added that within the three, relationship management with the service provider was especially crucial to the long-term growth of the customer.

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"The entire outsourcing industry is $ five trillion strong. The bulk of this is still dominated by outsourcing related to the manufacturing sector. Around 10 percent of total outsourcing is IT related, and India has around two percent of that pie at the moment," he said.

Outlining the 'waves' of outsourcing, Corbett said that the first wave of physical activities is a mature market now. The immediate volume of growth rested in the cresting and rising wave portions, which comprised of specialist work - where outsourced workers were part of the specialty of the client - and transaction based work, where the present stupendous growth was being seen. He added that the next wave would comprise of high sensitivity elements, which would include sales and bits of strategizing.

"The bulk of outsourcing is still, being done by the US. In fact, it dominates around two-thirds of the market right now. But Europe is playing a fast game of catch up and most of this is being driven by transaction based BPO activities," said Corbett.
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Outlining the future, Corbett said, "Outsourcing activities will have to inevitably move up the value chain - both in the kind of services provided and the kind of sources used. As the value of the service provided rises up to innovation, the sources continuum will also have to move up to more strategic alliances and joint ventures. One will have to facilitate the other."

On the sidelines, Corbett said that the backlash remained a sensitive issue, even as companies were trying to lobby with the government. He also said that the pressures were generally higher especially during periods of transition like the nearing elections and opined that a lot of things depended on the US economy's health.

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He also predicted 50 percent growth for the IT and BPO outsourcing industry space on an annualized basis for the next two years. Replying to a question on Forrester's prediction that with technology development most of the present transaction based work that is being outsourced will disappear, Corbett stated, "In concept, I do agree with this. As technology develops and companies find newer ways of interacting and connecting, jobs, which involved people previously, will disappear. But that is something that will take a long time to happen. I don't think anyone in the industry is even considering such a thing right now and I have not had anyone approach me with this issue. It is certainly an issue, but an issue that we will not face directly for the next five to ten years at least. It is nowhere near the horizon now."



When asked about the fragmentation that threatens the Indian BPO service providers and the future as a competitive entity as clients look for more value based services, Corbett said, "As clients look to form larger relationships with better services, the market cannot remain fragmented. It will be forced to consolidate due to competitive pressures and India is no exception. This consolidation will mean that smaller companies will be acquired or merged onto entities. Also niche players will appear as strong contenders and there could be examples where they have swallowed up larger, more general players due to their strength in particular segments."

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He added that such consolidation, though not far away, was certainly near for the Indian space and should happen from two to five years from now.



(CNS)

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