Offshoring and outsourcing used to be the corporate darling but with apps, automation, emerging competition, and protectionist policies, the honeymoon seems to be over. Although global outsourced services have widened its reach in 2017, we predict a further decrease in total revenue from $76.9 in 2016. In 2017, BPO and back-end services accounted for nearly 20%, while KPO/IT services accounted for 80% of globally outsourced business with India still leading the pack, followed by China, and the Philippines. The U.S. and the U.K. remained as the two biggest consumers of services.
The impetus for outsourcing and offshoring is to cut costs with better tax programs and cheap labor rates in countries like India, China, and the Philippines. With capacity issues out of the way, companies can now focus on core processes and expansion strategies. Outsourcing can be done through mainstream companies like call centers, individual contractors who may or may not work under the radar, and start-ups that concentrate on niche fields like programming, analytics, gaming, animation, finance, data services, healthcare, real estate, insurance, collection, and the like.
What used to be a sunshine industry is on the decline at a rate 5-10% since 2014 because of many factors:
- the rise of AI and automation that displaced workers
- the emergence of apps
- competition for low-cost but skilled workers leading to attrition
- increased wages rising by about 10% per year
- high wages of senior managers and
- failure to maintain service level
- increased competition from emerging outsourcing countries
- the threat to the security of data
- repatriation of services.
Top 10 Concerns of Locators:
- Stability and redundancy of utilities (electricity and connectivity)
- Ease of starting a business (government regulations)/government corruption
- Real estate cost
- Ease of getting construction permits
- Expected base-pay of workers
- Talent pool quality and numbers
- National Security