There has been a visible shift in outsourcing demands across the years of the economic recession stressing quality over price and including higher level functions in outsourcing projects. The drop in numbers of outsourcing contracts is in response to this shift where poor quality service providers are finding it hard to survive and quality service providers are finding more work than ever before. However, there has been no drop in the business experienced by top range providers.
So, in 2014, the expected trends will support better markets for ethical and high-quality outsourcing companies, while poor providers will continue to lose business.
A recent IAOP survey found 80% of current clients have been outsourcing more than a decade and the trend will continue with better strategic partnerships.
The key trends of 2014 will be:
- Demand for quality, competitive agility, scalability and innovation would continue to increase, while the "cheapest is the best" trend of outsourcing is firmly on the way out.
- Near shoring, rather than offshoring would be gaining favor in many industry sectors and outsourcing companies will be setting up service delivery and control centers within their target markets, backed by development centers at home.
- With the end of the recession, cost-savings is no more the primary focus, but better service, and this trend would continue through 2014.
- Outsourcing would be more function based than turn-key project based and rather than outsourcing only the non-core and non-strategic functions, large companies would seek partners who provide transparency and can shoulder more strategic functions and processes.
- Smaller organizations with high levels of quality check and maintenance of standards will benefit more than larger organizations with settled bureaucracies.
- Outsourcing would continue to grow in volume and amount of business though the numbers of contracts may drop as more work would gravitate towards quality providers who have smaller numbers.
- There would be a crisis for talented workers across the world and outsourcing would be required to balance the shortage of talent.
- Outsourcing companies that follow proper structures and processes would benefit as regulatory compliance continues to gain priority.
- Regulatory track record will be a deciding factor in selecting an outsourcing partner.
Outsourcing is no more a simple cost-reduction effort substituting costly onshore labor with cheaper offshore labor – it’s more than that and rapidly changing form. In fact, a recent survey done by Nice Insights into the trends of outsourcing bore out the fact that large outsourcing contracts are going to get bigger, while smaller level players are ceasing to outsource. The survey found that respondents who had an outsourcing expenditure between $10M and $50M annually were experiencing a 7 percent upturn. In contrast, respondents who had an annual outsourcing expenditure of less than $10M experienced a drop in the overall number of outsourced projects. The reasoning is clear – the bigger players have access to quality service providers, while those with access only to cheap and poor quality providers will have to forego the advantages of outsourcing.