The End of Outsourcing or a “New Digitally-fueled Outsourcing?

Outsourcing Institute President Daniel Goodstein Speaks to Founder Frank Casale About the Shift in How Work is Getting Done

Daniel Goodstein: Isn’t Outsourcing dead? Recent reports are that Outsourcing contract values are down 50% and there are many analysts out there that insist that Outsourcing is an old, dying model.

Frank Casale: Many analysts have enjoyed predicting the demise of outsourcing several times over the past decade. And they continue to be wrong.  Outsourcing is alive and well.  That said, the nature of outsourcing is indeed changing. When I launched the Outsourcing Institute in 1993, outsourcing was all about labor arbitrage and mostly your mess for less; it has pretty much remained the same for the past two decades. But this original iteration of outsourcing began to run out of steam over the past five years or so.   Many customers complained that the aggressive costs saves were gone,  the jet lag and time lag were wearing on them and they really wanted innovation, but weren’t getting it from their traditional outsourcing contracts.  Along comes digitally fueled service offerings powered by new technology, new business models, new pricing and less labor arbitrage. This is the New Outsourcing.

DG: If this “new outsourcing” you refer to can be accomplished by digitally fueled services, why does anyone need a service provider ? Wouldn’t it be easier and cheaper to do it in house or find a Digital or automation product instead?

FC: The advent of RPA, cloud, IoT and advanced analytics is changing the nature of how the work gets done but not necessarily who does the work. For many enterprises, they still prefer the bulk of the work, the investment and the risk to be borne by an outsourced service provider.  These customers simply want the results. With the implementation of digital transformation services, clients are beginning to realize that they can now have it all.   Better, faster, cheaper.  And yes, real innovation without the cost, risk and time investment. As much as they can stomach.

DG: With Brexit happening in the UK and the Trump administration in the US claiming to stop allowing foreign workers and penalize companies who outsource, we are getting a lot of nervous questions from buy-side members on how to adjust their buying decisions/portfolios and how to adjust go-to-market strategy for providers. What do you recommend?

FC: It’s still early to predict how this all plays out but it is wise to be cautious here and be prepared for serious disruption in your business model.  My simple advice is always as follows: in times of uncertainty, the most important factor is that of the relationship.  Relationships are fueled by trust, chemistry and experience over time, what I call “relationships equity”.  Customers will want to work with people they know and trust.  This is the ultimate risk mitigation for them knowing that it’s a bit of the wild west out there right now.  Relationships are your greatest competitive differentiator as it’s not a good time for customers to work with strangers, if they like their current job.

Visit www.oievents.com to learn about the Outsourcing, Automation and Innovation Seminar Series (OAISS) being held in several cities this Spring and the BPO Digital Conference in the Fall.