Outsourcing in a World in Recession
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In a situation when all of the world’s leaders are talking about the recession that is being experienced by the world’s top economy the majority of industries already know what to expect. Economists predict that manufacturing will slow down and consumer spending and retail will reduce significantly. This would be the first instance in history when the outsourcing industry will be faced in a world (not just countries) that is in a recession as there is no historical record yet to draw comparisons. Many developing countries including the Philippines are staking millions if not thousands of jobs on the continued growth of the industry.
In the case of Bangalore, India-based Satyam Computer Services, it predicts that the demand for outsourcing will not fall despite growing fear of a recession in the U.S. as its Chief Financial Officer V. Srinivas is quite bullish about the future. Meanwhile, the 11th Annual Global CEO Survey conducted by PricewaterhouseCoopers , highlighted that the growth in offshore outsourcing is likely to come primarily from companies already outsourcing, not from those that are new to the practice.
The Philippine business process outsourcing industry (BPO) will remain bullish in 2009 as the steady demand for lower cost but reliable information and communication technology services will spur most companies in the U.S., Europe and Australia to continue to outsource some of their functions to countries with cheaper but skilled labor force. The Philippines will also remain a key player in the BPO industry through the help of its steady supply of competent and educated workers, improving telecom infrastructures and government incentives.
Oscar R. Sanez, chief executive officer of the Business Processing Association of the Philippines, expects that the BPO sector will create 100,000 new jobs in the current year and continue to slice a bigger share of the lucrative global outsourcing market. There is a pressure in the U.S. which is experiencing a growing unemployment problem to retain jobs at home but the need to reduce cost is making outsourcing a more attractive option.
It is evident that the global recession is pressuring most companies to cut cost while keeping profit margin intact. Outsourcing helped as it allows companies to cut costs by 50 percent to 60 percent. A number of companies that haven’t tried outsourcing before are now considering accelerating their plan to outsource as it is no longer about competitiveness but about survival of the company.
Research and advisory firm XMG Global released a survey which states that companies in the U.S., Europe and Australia are now more interested to outsource. Lauro Vives, founding president of XMG Global, believes that there is no alternative to offshoring and it is a viable business model if done properly.
Author: Carlo L.
Tags: BPAP, offshore outsourcing
February 20th, 2009 at 12:44 am
Our 2009 Black Book research and input from world user surveys agree with your post. Buyers are looking for alternatives as traditionally low labor cost destinations are getting more competitive & skill levels are within compare. Exciting locations which are emerging such as the Philippines have great opportunity ahead.
February 25th, 2009 at 1:58 am
I sincerely agree that one of the ways to handle the challenges to recession and succeed is through outsourcing.
The cost ratios between domestic and off-shore resources and personnel cannot be ignored as well as productivity and quality improvements, however these gains are not easily attained without mature governance and efficient contract structures.