Global firms will outsource to “best of breed” centers of excellence

Outsourcing is the new competitive dynamic. Global companies who want to boost their competitiveness resort to outsourcing to improve their cost position and create jobs.

Avinash Vashistha, co-founder of NeoIT and author of the book “Offshore Nation” that specifically addresses outsourcing trends speak about outsourcing in the future and what it takes for the Philippines to become an e-services hub in the region.

Outsourcing in the future
“Outsourcing will become one of the key component of corporate strategy and will receive C-Level and board attention. It will be strategic and a must to maintain competitiveness.”

According to Vashistha, “New supplier geographies will emerge with unique service offering. Countries will develop centers of excellence to address niches. Clients will outsource to “Best of Breed” centers of excellence and new types of business and organization models will come into play.”

He said the Philippines could be the “Best of Breed” in animation and call centers; Russia in R&D and encryption technology, and China in embedded systems and telecommunications support and management.

Vashistha has over two decades of experience in global services delivery in a variety of vertical industries including telecom, healthcare and financial services among others. As Managing Partner of Global Advisory Services, he led neoIT’s consultants in sourcing over $1 billion in IT and BPO contracts in 2003. As a co-founder, Avinash has helped develop and nurture neoIT’s mission to improve the way global services are organized, outsourced, transitioned and delivered.

“BPO work will be offshored predominantly in captive, BOT or joint equity model with transactional BPO being directed to third parties.”

The Philippine Advantage
The Philippines, according to Vashistha, is positioned well as a center of excellence to set up shared services centers and is better positioned to niche in services like voice-based BPO and animation.

“I would like to meet suppliers from the Philippines to understand their service delivery capabilities and how they are planning to difference themselves and work towards being the Best of Breed. The Philippines is a great destination with exceptional clients and investors,” observes Vashistha.

There are more than 60 BPO operators in the country, the big ones are mostly third party contractors serving global accounts. The BPO-back office sector currently employs more than 20, 000 employees while the entire IT and IT-enabled services sectors employ around 150, 000 knowledge workers.

Through his experience with Global 2000 clients in the USA, Canada, UK, Europe, Australia and Asia, Vashistha has developed exceptional expertise in creating and executing offshore IT and BPO strategies. He has evaluated and conducted due diligence on hundreds of supplier firms including companies in Russia, China, the Philippines, Eastern Europe, UK, Ireland and Vietnam. He has directed sourcing assessments, IT and BPO sourcing transactions, and executed program governance models. His opinions are sought and recognized by worldwide organizations as Nasscom, Marcus Evans, CNN, CNBC and TMG.

“Many Canadian firms like Toonz are planning to leverage Philippines for animation. The Philippines is already recognized as having the skill set and the drive to emerge as a COE for animation. Gaming and entertainment companies should be targeted by the Philippines to develop this niche.”

Opportunities in Outsourcing
According to Vashistha, the future belongs to “Best of Breed” players and services. Being a generalist is at best a short-term approach. The future needs leading niche players to lead the global sourcing to COEs.

“Companies should try and build long-term relationship with their clients, which requires significant marketing investment. Scalability is important and vendors need to be able to grow with clients. Do not try to be all things to all clients – focus on the niche expertise and COEs.”

Over time, supplier countries will become experts in certain types of services e.g. Russia in product development; Philippines in voice-based first level support; India in application maintenance. Vashistha emphasized, corporations will take shared services and critical business functions to global centers of excellence. The model of the future is more outsourcing rather than less.”