The Future of Offshore ICT Outsourcing 2015

MBA students Berend Ten Wolde, Jordy Kool, Manikantan Muthu, Mona Matar and Zsolt Zsirony at the Rotterdam School of Management explored futures of ICT outsourcing. They brought in newer perspectives because of their different backgrounds, and having been involved in some way or the other with offshore ICT outsourcing. Download the full report in PDF here.

Introduction

Outsourcing of Information and Communication Technology (ICT) activities to faraway shores is one of the most discussed and hotly debated issues in business circles and literature nowadays. Availability of a large number of well-qualified but cheap skilled labour in parts of the developing world and enabling broadband communication technology has triggered companies to think of new business models. Every organization around the world has already engaged in or is planning to engage in the activity of outsourcing a part of its business process offshore.

Although there are advocates and sceptics on both the customer and vendor sides, what major developments are going to happen in the coming decade and whether offshore ICT outsourcing as a trend would continue to deliver to companies, on the promises of low cost and high quality services is not very clear.

By mapping the uncertainties on to the scenario axes, we were then able to come up with a set of relevant, plausible, surprising but coherent scenarios for the future of offshore outsourcing. By assessing the different scenarios we were then able to come up with the implications of each future, and the various options available for both vendors and customers within the industry. By using our scenario set, companies would be able to assess the robustness of their current strategy and be able to understand the changes they would have to make in terms of Markets, Products, People, Processes, Infrastructure, Finances, Knowledge Management, Innovation, to succeed in the long term.

Scenarios

Offshore Outsourcing Mania

In a scenario, where the rapid pace and extent of globalization is favoured by a stable political and regional uncertainty in the countries or regions where companies are considering to outsource their business processes or parts of it to, products and services can be provided through cross-border without limitations, and offshore outsourcing will flourish.

Offshore Outsourcing Phobia

Although the rapid pace and extent of globalization favours global trade, lack of global and regional stability has an even more serious impact on the offshore outsourcing. Given the fact that a large scale IT outsourcing contract has a relatively larger time horizon and reversing the trend in the short term (e.g. discontinue operations, lay off people) would impact the company economically, such a scenario would make firms wary of outsourcing their business processes.

The neo-Protectionist Wave

Even though regional political stability is guaranteed, protectionist measures, instead of open market and free trade, dominate the strategies in the developed countries, could seriously inhibit the rapidly increasing trend towards offshore ICT outsourcing.

Economic Melancholy

Lack of regional political stability followed by a series of protectionist measures and policies in regional economic blocks (e.g. EU) can have an even more serious impact on offshore IT outsourcing. This scenario, aptly called Economic Melancholy, puts the outsourcing industry and the firms in it, in a sense of despondency. This scenario could sound the death knell of the outsourcing industry, with all parties engaged in business within it, would not be able to reap the economic benefits, because of the socio-political environments they would be operating within.

Download the full report in PDF here