When off-shoring came in vogue, people tended to call it “globalization.” And indeed it looked like globalization in that it spread work and workers all over the globe. But in hindsight we can clearly see that it wasn’t globalization as much as it was the Big Bang of Business Sprawl.
The big bang itself was ignited by several fuses, primarily new relaxations of protective regulations in the U.S.and elsewhere, and technologies that made remote operations both possible and profitable. So, boom baby, work was contracted and shipped to places all over the world and when worker’s wages rose there, or the regulation monster began to stir, the work was packed up and moved again.
The world indeed turned out to be flat as the best-selling book by Thomas Friedman said it was, and companies the world-over thought they had the concept down pat.
Except they didn’t.
You can see plenty of evidence in that from the retraction of work and contracts. For example, GM shocked the world when it killed offshoring contracts last year. GM had previously offshored 90% of its IT services and then it brought all that back citing the hidden costs and loss of control as its reasons for doing so.
While GM is arguably the most visible of reversal cases, it isn’t a sole outlier, nor is IT the only area where offshoring is reversing. According to analysts at ISG the global outsourcing market fell 27% last year, 11% of that in the fourth quarter alone. ISG slides give a more granular breakdown of where and when said fallout occurred but the bottom line is that it did fall.
In its place rose a clamor for near-shoring, on-shoring, and rural-shoring. We’ll call it Outsourcing 2.0. Such is to outsourcing as Twitter is to blogging. That is, the space is shortened, the characters fewer, and the adoption wider.
Adoption is better because a) the concept of outsourcing is no longer new and therefore not hard to understand, b) because bringing jobs back onshore, or close too it, is far more politically and culturally palatable in any country than sending jobs elsewhere, and c) there are multiple benefits in outsourcing closer to home.
The most obvious advantage to bringing IT closer to home is the eradication of the time warp. It’s no secret that it’s tough to work with teams in drastically different time zones. No one cherishes 3:00 AM conference calls on any side of any ocean.
Outsourcing closer to home also means less time lost in shipping data, waiting on setup and reviews, and traveling to far flung destinations for oversight meetings.
There is also better control of intellectual property and compliance issues if for no other reason than outsourcers in your own country have to play by the same set of rules as you do, or are at least subject to legal recourse if they don’t. And if the outsourcer is near-shore, at least the plane ticket costs less and there’s no downtime due to jetlag.
But in truth the whole concept of outsourcing as we know it today is missing the end goal: to hire the best and the brightest talent.
A common nightmare scenario in offshoring still exists in outsourcing of all kinds: the old bait-and-switch where workers with top skills are presented at the sales meeting only to be replaced by workers with lower skills once the contract is signed. This just goes to show that you often can’t get the best talent available by buying (or rather leasing) a whole block of workers at a time.
Which is exactly why the next evolution in outsourcing is already cresting on the horizon: that is the true globalization of the workforce.
The cloud and mobile computing now enables companies the world over to hire the best possible talent anywhere and plug them into a central framework that is fully under the company’s control. This versatility in picking and choosing exactly who you hire to do what greatly increases the quality of work and the control of the data. It also reduces the number of workers needed since true talent can produce more, better and faster than several mediocre or poor performers can.
Given cloud services are far cheaper than the typical outsourcing service there are additional savings to be had even if your company switches to a private or hybrid cloud instead of to a public cloud. Plus, your company retains the data and can revoke any worker’s access to it at any time. This is a huge advantage over handing your data over to an outsourcer – near or far. Give that some serious thought when considering your next move.
Outsourcing 3.0, i.e. a truly globalized talent force via the cloud, will be the best play for most companies in terms of bigger cost savings, increased competitive edge and control, and increased worker productivity. And it just happens to be a great deal easier to deploy too.
Pam Baker is the author of eight books and hundreds of technology articles published daily in leading online and print publications. She is a member of the National Press Club (NPC) and the Internet Press Guild (IPG). You can reach her or follow her on Twitter and on Google+.
Interesting opinion.
Good points about Outsourcing 2.0.
However, Outsourcing 3.0 has already been available and does not work well. If it did, sites/services like eLance.com would be popular.
Someone still needs to gather, screen, qualify, test, bill and manage the Talent. Most customers do not want to or have the ability/test to do so.
Which is way our business model at Rural America Onshore Outsourcing works. Call it Outsourcing 2.5. We recruit the best Talent nationwide and do all that stuff before and during the relationship with our customers.
We are the grease that lubes the friction of the process between customer and Talent.
The holy grail is Outsourcing 4.0(?); but until then Outsourcing 2.5 is the best blend.