Backlash can’t harm offshoring: Gartner

MUMBAI: Gartner, Inc today said that the small but growing backlash against offshore service providers in the US was a result of the current downturn in the economy. Gartner said this would not affect the trend towards offshore BPO.

'We are witnessing a disaggregation of the vertically integrated enterprise and a strategic shift in the way business is evolving in a growing global economy.' Sujay Chohan, Research Vice President, 'Offshore BPO', Gartner said. The Internet, free trade and the World Trade Organization are instrumental in enabling countries to leverage their core skills in a global marketplace.

Currently there are 150,000 to 200,000 people employed offshore in the call and contact center business, predominantly in India, the Philippines, Ireland (to a lesser extent) and a host of emerging destinations across the world. As more offshore stories get publicized, there has been increased backlash from trade unions and governments regarding the job losses within local communities.
The anti outsourcing tirade from local trade unions and local government bodies is primarily a result of the relocation of labor-intensive business transactions, such as contact centers and transaction processing work to lower-cost locations.

Large multinational corporations such as GE, American Express, Proctor & Gamble have built large shared service centers in locations like India. These successes have spawned third-party delivery models, such as offshore and remote delivery of business processes by independent service providers that offer service ranging from voice & e-mail contact centers, end-to-end transactions processing and high-end analytics that lead to cross-border outsourcing contacts.

The New Jersey bill, which first addressed this issue, by itself, will not have a direct impact on the offshore BPO industry, because the number of contracts directly being outsourced by the New Jersey or other governments is relatively small, more importantly, the bill has not been passed and been sent back to the senate committee for review.

Although the value proposition of going offshore remains significant, offshore vendors should be sensitized to the issue of layoffs and, in particular, hasten their plans to have a larger domestic delivery presence to provide end-to-end business process outsourcing (BPO) services and help reduce social resistance against the offshore BPO model. Offshore Providers must also realize Business processes form an integral part of the smooth functioning of any enterprise and should focus on building trust and relationships at the local level, while paying more attention to change management concerns, Gartner advised.

Mr. Chohan, adds, 'Although we anticipate the backlash continuing in the short term, as concern in local communities grows, offshore service providers should not get overly alarmed, because the backlash is an inevitable part of this process and will dissipate as the economy improves.'

Stopping outsourcing is a digression no country can afford to make. Globalization has rendered most businesses to be run virtually. What started out with the outsourcing of application related IT services to India has increased in scope to include the entire gamut of business processes. Technology is now making it possible for enterprises to source these business processes from remote parts of the globe, giving rise to the 'virtual enterprise' (distance, so important to early business processes deals, is no longer an issue).

'The phenomenon of offshoring cannot be reversed. What we are witnessing is a change in the way businesses are evolving in an increasing global marketplace. Enterprises (especially US companies) will always follow the most ‘economically efficient’ path to managing their businesses, irrespective of where they are located. Offshore delivery, especially from India has clearly demonstrated the lower cost and increased service delivery advantage. The cliché, they come for cost and stay for quality, has been aptly demonstrated', added Sujay Chohan.