Outsourcing's new trends

Outsourcing is no more only about employing in cheap labor but with the advent of globalization it is all about competitiveness, employing intelligent skilled professionals and opening of new markets.

The wing of outsourcing trends has been spreading beyond India and China with more countries trying to raise the stake of competitiveness by providing specialized skilled labor force.

With the world hit by recession it is very important that small and medium size businesses also outsource their business processes to cut down on cost. With the opening of new economies with extremely liberalized policies, we have got a vast global talent pool of offshore skilled workers who can make your business function comfortably.

In an interview with Forbes, Robert Kennedy, director of the Global Initiative at the University of Michigan's Ross School of Business, said that liberalization on the policy side is one of the key driving forces of outsourcing at the macro level. He said,"In the mid- to late-1980s, the global economy consisted of the U.S., Europe and Japan. Places like India and China were behind Central and Eastern Europe and parts of Africa. They weren't really engaged in the global economy. That's completely changed. Roughly 3 billion people have entered the global economy.

They want to buy things, and in order to do that, they have to sell something back to us. They can sell us manufactured goods, and they have a small advantage there. But in services, they have a huge advantage. If you move an automobile manufacturing plant from Michigan to Mexico, you may save 20%. If you move a call center offshore, once you've set it up on a run-rate basis, you'll save 50% to 60%. The advantage in services is that labor costs are a bigger overall percentage."

Digitization of business processes have made it irrelevant where your business functions are processed. Virtual employment is the buzz in the world of outsourcing. Every record involved in the business processes can be digitized and stored including business contracts. With this the small and medium businesses can get their processes digitized and cut down on huge cost of infrastructure, high salaries for native employees and the emotional burden of dealing with them on a personal level.

As Mr. Kennedy said,"In the past it was done by middle-income Americans, but now it's done by middle- or high-income Indians. That leads into the next trend, which is the low cost and high speed of computing and telecom. Bandwidth is cheaper, and international calls are cheaper."

Another prominent trend in outsourcing is the development of a global talent pool with skilled professionals. With more and more number of foreign educated professionals deciding to return to their native countries, the outsourced work is now handled by specialised task force in destinations like India.

"There is a lot of engineering talent in India and China, which leads to the last trend--the rise of a global business culture...Now 30% of the MBAs at U.S. schools are international, and they're going home after they get their degrees. They used to come to school in the U.S. and stay here. These countries have liberalized since then. They've got their own venture capital groups and start-ups. That really closes the cultural gap.It's much easier for someone at Citibank or AIG to do business in India if they've been to the same schools and they use the same software like PeopleSoft. That's made it much easier to go abroad, as well. When I looked at the class of 1980 from developing countries, only 20% were working in their home region after five years. For the class of 1990, it was up to 38%. For the class of 2002, 56% were back in their home region. In 1980, if you were a Harvard M.B.A., there weren't a lot of interesting jobs for you in India or Brazil. The place to go was here or Europe. Now if you're in India with an M.B.A., there are numerous interesting jobs for you, and a lot of them pay as much as here--sometimes even more," said Mr. Kennedy during the interview.

Mr. Kennedy, the author of The Services Shift, a new book on off-shoring, concludes: "If you look out over the next five years, 90% will be open to the global economy. There are always some backsliders, like Venezuela and Zimbabwe, and North Korea has never moved forward. The rest all have Internet connections. They're investing in technical and higher education. That means the network of service providers around the world will be denser, and there will be more opportunities."

These off shoring trends are not only for the corporate giants but targeted equally towards the small and medium businesses too. It is important to understand the upcoming trends of the world economy and its link to the more specialized outsourcing processes for the profitable outcome of your business functions. These trends are here to stay so buckle up to enter the world of virtual employee and employer...