By Mark P. Dangelo
www.Innovative-Relevance.com
With unemployment at over 15 million adults coupled with a projection of $80 billion in deficits among state unemployment benefits, expectations are high among a tax paying population that the use of outsourcing would be limited moving into the next decade. After all, with so many professionals out-of-work, productivity down, and the political will strong, why are we even talking about outsourcing at all?
Why indeed. Sentiments aside, the use of onshore or offshore workforces to provide a specialized or highly productive process augmentation continues to grow at a projected 10% for all of 2009 – but down from a traditional 20%+ compounded growth rate.
Outsourcing has been around for hundreds of years in various forms. However, with the exponential increase of global communications and ease of travel started in the 1970’s, outsourcing has mushroomed into an industry with lobbying clout and a combined economic revenue streams in the hundreds of billions. It reaches all corners of the globe including some places that seem strange.
Nevertheless, while the industry has flourished, they are facing a game changing shift that few outsourcers recognize and even fewer are prepared to act upon.
Culturally Challenged
Striking at a time when Congressional bills are being sponsored (e.g., 50:50) to limit the impact on domestic economies, many outsourcers fail to comprehend the need of diversification at all level of operations within their organizations. This is particularly true for offshore firms who prefer to use visa-sponsored foreign nationals rather than domestic workforces to promote a service or integrated product offering. These homogeneous outsourcers continue to “confront” their prospects with workers who frequently do not have empathy for domestic workers, nor understand the socio-economic realities confronting their proposed outsourcing solutions.
This lack of diversity within these foreign operations are often caused by the same mistrust they accuse domestic politicians of possessing. Until these outsourcers understand of the need for radical domestic restructuring and diversification in every country of operation, they will consistently be confronted by those who disbelieve their sincerity of assistance and the economic benefits they are proposing.
Old Market Ideals
Just five years ago, outsourcing contracts were much easier to obtain. For many, they presented a reasonable business case and then took an order for a multi-year, multi-million dollar contract. With an on-going two year global recession, these traditional approaches to the markets have been permanently changed.
This can be superficially witnessed in shifting wealth, government interventions, pay-limits, increased nationalism, and, of course, a rise in consumer poverty and household debt.
But, the go-to-market approaches and discussions for many outsourcers have not fundamentally changed. Why? Because success had instilled organizational overconfidence – and an adamant disbelief that their models might potentially be “out-of-phase” to developing markets and buyer requirements. The outsourcing world is no longer simply about labor arbitrage.
An Out-of-Phase Business Model
The discussions have changed, but the internal workings of how the outsourced business requirements are satisfied have not. The methods by which outsourcing employees are compensated have been largely untouched. Moreover, they also continue to believe “one-size” of outsourcing approach fits everyone. The models used to satisfy client demands fail to recognize adequate gain-sharing, proper governance, hybrid deployments, potential co-operatives, and highly flexible business orchestration.
In general, outsourcers fail to properly frame the need for domestic, onshore collaboration and partnering with existing workforces and future operations. Labor arbitrage is still the model being tightly clung to by sales forces as the way to gain a prospects attention.
For many, the use of non-conventional approaches that benefit both domestic and foreign economies (i.e., the new reality of globalization) are frequently feared and distrusted.
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In summary, until outsourcers accept domestic diversification, new market approaches, and changing business models, they will continue to grow at the expense of country economies. This challenge has been noted not just by bankers, but by the IMF, the UN, and other international bodies all concerned about rising protectionism and in-county sentiments.
As the new decade dawns, the inflection point is being reached where consumer demand is aligning with political will against the wholesale export of jobs. The strange thing I see as a proponent of outsourcing and globalization, it can all be easily avoided where everyone wins.
It really is up to the outsourcing firms to engage domestically with a different discussion, personnel, and delivery models. Otherwise, in the mid-election year of 2010, they may indirectly find themselves under a new class of aggressive regulators and domestic watchdogs.
And yes, there are those firms that “get it.” There are progressive outsourcing operations that are making the needed changes against a new market and organizational reality. Those are the firms that stand the best chance of survival – and of benefiting everyone within the domestically and globally interconnected economies.
Let’s frame one last question. If you are an outsourcing entity, put yourself in your clients place. What bank receiving federal assistance wants to say they have taken taxpayer money and then displaced thousands of American workers? A balance must be achieved – very soon.