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Thursday, November 6, 2008

Outsourcing & the New world order

With the conclusion of USA elections and Obama's thumping victory, industry captains are now issuing statements about what stance should the president elect be taking.

I have a different view on this.Let me explain this in my own words. Outsourcing has been started with "arbitrage" as the lynch pin . For more on "arbitrage" (ref Post 2000 , there have been several multi million dollars shown as the "savings", the impetus on the vendor being "reduce price at any cost".

Through the past eight years , businesses have been "outsourcing " more and more of the operations . Every aspect of IT operations including key programs and projects are commoditized - i.e., sold like a sack of potatoes ... well if you need this you will ....blah blah dollars per hour instead of per kg weight.

IT companies were enjoying the party - more work ...less price ....and they have rushed headlong into a vicious cycle ...more work less price and more people ....with shrinking margins ,needing more head count for billing ...recruitment spiralled. Now it is out in the open orders , huge number of people without work !!

Where is the key to future ....outsourcing companies have to ensure value addition happens across every activity which is outsourced.With millions of highly educated MBAs, post graduates , engineers and with fantastic analytical abilities , how many of the companies suggested betterment in existing processes, how many processes /projects have objectives which will help increase the revenues for the client's customers.

How many account relationship managers really understand the client "pains"....all the candle burning during RFP response has to be spread across many PoCs have been given to the client?

Price is no more the differentiator ,it is painfully obvious that what has been working very well so far has ceased to work.

The companies which will " CREATE VALUE SOFTWARE DEVELOPMENT" are going to survive and grow.Incidentally these companies may even get a premium pricing !!

Its a wake up call for out sourcing companies !!

More to follow....

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