Outsourcing Is Here To Stay -- And Grow, Says Alsbridge CEO

Offshoring and Potential for Global Expansion Will Drive the Industry

DALLAS, November 1, 2008—Can outsourcing, the management tool of choice for many major corporations, continue to grow at the rate of the last decade?

Driven by offshoring and global expansion potential, the answer is yes, says Ben Trowbridge, CEO and president of Alsbridge, Inc.

“There’s no doubt that offshoring will continue,” Trowbridge said. “The forces of globalization show no sign of retreating, the delivery model is proven, and competitive pressures will demand action.” He said many high-profile organizations have embraced outsourcing, but overall market penetration is still low, with plenty of room for growth.

Outsourcing has been the engine of growth for an army of hardware suppliers, systems integrators, consultants and the new industrial heavyweights of India. “It might have remained a minor sport, below the radar for most corporate executives, except for the seismic shift in the economics of the deals which came from offshoring,” Trowbridge said.

Offshoring meant that labor costs in many deals could be cut by 80-90 percent. Translated into a price to the client, the saving was 40 or 50 percent. Outsourcers grabbed the opportunity with both hands, and Indian-based suppliers suddenly started exploiting their location advantage by undercutting traditional deals and creating a new delivery model.

Almost every outsourcing decision now made involves sending work offshore to a low-cost location –India for English-language work, Eastern Europe for other languages, and other destinations – Latin America, the Philippines, Malaysia, and Vietnam.

“This is delivering real cost benefits, as well as facilitating the re-engineering of processes, and accessing untapped pools of skilled labor,” said Trowbridge. “It is a clear example of the globalization of services, following the path of manufacturing decades earlier.”

Although large organization can set up a captive offshore, there is less risk in piggy-backing offshore on the existing facilities and experience of outsourcing suppliers. “Established outsourcers have huge inherent advantages over captives,” said Trowbridge.

He cited the advantages: experience; size and scale; professional service delivery tools and techniques; and understanding of the local environment and recruitment market. He said experience shows that there is no inherent cost advantage for captives versus outsourced centers.

The growth opportunity for outsourcers is clear, Mr. Trowbridge said. “Their challenge will be to prove to clients that they can deliver better on the promises they have made on partnership, risk-sharing and investment. Given that caveat, outsourcing is here to stay, and grow.”

For more information on outsourcing and offshoring, contact Alsbridge, the award-winning advisors on outsourcing, shared services and offshoring, at comments@alsbridge.com.