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OUTSOURCING IT outsourcing and shared services trends
Technology outsourcing and shared services are likely to be at the forefront of the next wave of growth, fuelled by factors beyond cost arbitrage, observes Sudeep Nair, Senior Director, Cedar Management Consulting International
the business world to identify the most significant transformations of the last two decades, and two items are likely to figure at the top of their list – Increasing adoption of technology by business and the realisation that businesses should stick to their core competencies and outsource non-core services. The confluence of these two phenomena has resulted in the rapid growth of IT-enabled services, IT outsourcing, business process outsourcing and shared services.
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IT outsourcing and offshoring is an imperative for organisations due to rapid changes in technology, diverse skill requirements and the scale of teams required to deliver large programmes. The business case for IT outsourcing has moved far beyond just labour arbitrage. Due to the rapid improvements in technology and the increasing dependence of business on IT, businesses can no longer hope to deliver all the required services in-house. They will need to use services from best-in-class vendors.
On the other hand, business process outsourcing is embraced by organisations that have large-scale operational requirements, making it infeasible to hire in-house teams. Improvements in remote connectivity and bandwidth have enabled “work from anywhere” models, and thus process activities have naturally moved to countries that can offer cost and scale advantage.
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Even organisations that do not have the high scale of requirements justifying business process outsourcing, have realised that most support services, transaction processing and other administrative tasks are duplicated across their divisions. They see clear benefits in bundling such similar services under the ‘shared services’ model. It is estimated that over 80% of the Fortune 500 companies have implemented some form of shared services in their operations.
So what are the factors that are likely to drive the next wave of adoption of IT outsourcing, business process outsourcing and shared services?
Opportunity in crisis
Typically, the journey to outsourcing and shared services involves some effort in change management and transition. Universally, businesses do not recognise the need for this transformation until they go through economic or business related crisis. Western markets went through two waves of transformation during the Y2K era and during the 2007-08 crisis. The next wave of growth in IT/business process outsourcing and shared services will be driven by a combination of crises and opportunities. Western markets are witnessing a digital transformation, and are looking for new operating models to leverage the opportunities involved. The Middle East is going through a crisis with oil price at its
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