Alsbridge CEO and Collaborative Outsourcing pioneer, Ben Trowbridge, says, as the outsourcing industry moves into 2007, higher priority must be placed on staying cost competitive and staying ahead of global trends in the sourcing market.
"Companies want to see the results of their sourcing projects turn out successfully," observed Trowbridge. "In this regard, we believe our predictions of the market will prove beneficial to industry leaders and buyers in all stages of the sourcing lifecycle."
Alsbridge proprietary data, public information and current industry trends have led Trowbridge to offer his predictions for 2007:
Because of a tightening U.S. labor supply in technology, accounting and other processes, U.S.-based companies will accelerate their outsourcing strategies to stay competitive.
Contrary to prevailing opinion, cost of labor in India will remain neutral when compared with wage inflation in the U.S. The offshore trend will not subside.
Contrary to prevailing opinion, China will still lag other markets, mainly India, as a destination for English language driven BPO, or shared services centers due to language, low national birthrate, Intellectual Property and other legal issues. The exception will be those companies who have a market strategy to sell into the China market, which will override the former comments.
New areas of Eastern Europe will open up and should be evaluated as local authorities jump on the outsourcing, shared services and offshore boom.
The "location" decision will become more challenging due to shifting political and threat profiles.
The major Private Equity firms will again review acquisition and rationalization of the large outsourced provider market. The fact that no deals were done in 2006 does not mean they have lost interest.
Outsourcing of procurement will gain momentum in 2007 as certain providers begin to achieve true scale and market share as others continue to challenge them. The business case will become the velocity case.
Indian providers will continue to grow their global presence and win even more complex deals. The challenge will be to move from their high margin man-time "voice" pricing to true outsourcing price structures.
Throughout next year, the thriving U.S. providers begin to fall into one of two groups:
“The Transformers" -- Those that offer transformational outsourcing as a result of taking on multiple process silos, thereby gaining enough mass to affect change.
“OAP providers" -- Those who focus on single functional areas, often within a single vertical market, and offer outsourcing as a product (OAP).
Shared services centers, where clients choose to outsource to a center owned by the company, will continue to represent as much as half of the offshoring activities with Indian providers starting to participate more and more, creating hybrid solutions eventually poised for outsourcing. U.S.-based outsourcers will lag in adopting this solution area.
Knowledge Process Outsourcing (KPO) will grow significantly over next 3 years and generally go to captive centers, or be outsourced as a part of hybrid transactions. Research and Engineering will grow significantly as an offshored service.
"Future trends are easy to identify if you know what indicators really make a difference," says Trowbridge. "You have to know how to read between the lines when it comes to revenue numbers released by outsourcing providers. While an interesting statistic, forecasts must be evaluated based on labor statistics, birth rates, economic indicators and hard-to-find, internal corporate activities not released to the general public."
Trowbridge says his company gathers data from a variety of sources, including customers, providers, government agencies, research firms and trade and business media from around the world for the use of helping clients make informed decisions.
About Ben Trowbridge
Best known as a thought leader in the evolution of Outsourcing, Ben Trowbridge is a proven leader with more than 20 years of diversified global experience as Managing Partner, CEO and Senior Executive with proven experience in hundreds of outsourcing, shared services and offshore transactions as a consultant and buyer executive. In acknowledgment of his achievements Ben has been nominated for various Innovations in Outsourcing awards and is a recognized leader in all areas of IT and BPO sourcing and relationship management.
He has created a number of new, and now proven, sourcing models to include the Sourcing Alignment System (SAS)(TM), JVsourcing(TM) Methodology, FastSource(TM) and the Market Reality Assessment (MRA).
He has led and supervised sourcing transactions ranging from $150 million to $2.2 billion for a variety of activities such as F&A, HR and IT across multiple industries to include: transportation, consumer products, telecommunication, manufacturing, retail, technology, entertainment and energy/utility industries.
Ben previously served as Managing Partner and as a Founder of Ernst & Young's Outsourcing Services Business, which was sold, as part of one of the largest consulting services sale to Capgemini for $10.5B Euros in 2000. Prior to Ernst & Young, Ben served in a variety of executive roles at EDS during a number of high growth years. Prior to his civilian career Ben served in the U.S. Marine Corps attaining the rank of Captain.
