When Motorola invented six sigma in the 1980’s, little did they know that it would span a global phenomenon that would make people realize the need for improved processes in the way modern business is conducted. Today, the need for improved processes that results in cost-effectiveness and increased profit margins is a given for any company that wants to compete globally.
Offshore outsourcing is just one of many ways companies are doing this. In and of itself, outsourcing is already an improved business process. By segmenting different aspects of its business, such as customer service, technical support requirements, accounting, and information technology among others, a company can concentrate on building its core competencies and save itself the time and money it would need in order to build up its expertise in a certain field.
A good example is the customer service function or the graphic design, multimedia and internet marketing functions within a company that manufactures and distributes consumer products. While these functions may be necessary to gain and retain customers, yet they may not really be considered a core competency of the company. Thus expenses in this area will mostly be considered just that - necessary expenses not tied to any hard ROI. Outsourcing these functions give way to more cost-effective solutions.
Whole departments that would cost hundreds of thousands or even millions of corporate dollars to staff, run and maintain, when brought to a reliable outsourcing provider, not just shaves off some expenses, but at the same time transfers this process to an organization that specializes in just this sort of service, making it faster and relatively more efficient.
As an industry, outsourcing is growing fast but it is still relatively in the early stages of its development. Territories are still being mapped out and different countries continue to carve their niche and make their mark. Today, India is still the global leader in the offshore industry with close to 40% marketshare, while the Philippines and China are the next largest players with about 5% each. China’s specialization is in engineering projects. Meanwhile, the Philippines concentrates mainly on customer care and professional services such as accounting, animation, multimedia and the like.
The Business Process Association of the Philippines, estimates the global outsourcing market to reach $130 million USD by 2010 with the highest growth rate in the BPO sector which is expected to grow at an annual 35% a year until 2010. Meanwhile the IT sector is expected to grow at 25% while growth for the Engineering Sector would be at 15%.
Compared to other countries, the Philippines enjoys advantages that make it much more suitable to outsourcing such as the high-quality labor pool - more than 400,000 college graduates a year. Its cost-competitiveness - the Philippines and India are the 2 lowest service providers when it comes to cost. In terms of telecomm infrastructure, the Philippines gets better marks than China, India and Malaysia. It is also perceived as better in terms of real estate, compared to China and India. (source: BPAP - “Offshoring & Outsourcing, BPAP Roadmap 2010″).
The global phenomenon of outsourcing is just starting. It ushers in a new era of specialization among companies, industries, maybe even countries. Currently, the business landscape is already changing. Developments in technology are making the world a smaller place. It remains to be seen how much of a part outsourcing will play in this changing business landscape, but at the onset it seems that it will play a major role.
The question that remains is - how ready are companies to embrace the changing landscape in order to remain competitive in a global economy?
