Published on November 17, 2008
www.Op2i.com Interim survey findings - a quick snapshot As off 7th November 2008 The survey is available at http://www.proxi.co.uk/op2i 1
Context • Op2i launched in October 2008, a survey to understand the state of the outsourcing market, given the current economic downturn and perceived view that there was a fundamental shift from Outsourcing 1.0 to Outsourcing 2.0. – The survey has gathered information from outsourcing users, suppliers and experienced advisors, via an online survey. – This analysis is based on respondents from across the globe, including the UK, USA, Europe, India, Australia, Philippines and the Middle East, as of Friday 7th November 2008. • Op2i will be releasing survey findings, in addition to interviews with key industry leaders through a report which it will be launched at the International Outsourcing Forum, in Barcelona in March 09. • The following slides represent only an interim snapshot view, and only represents a fraction of the information collected. • We encourage all those involved in the outsourcing industry to take part in the survey to provide us, and the industry a robust view of where the outsourcing industry is headed! – The survey and 2.0 analysis tool is available on http://www.proxi.co.uk/op2i Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 2
Interest in outsourcing - mixed feelings Increase interest in outsourcing, given econom ic dow nturn 60% 50% Just over 50% of the respondents believe 40% the current economic downturn and credit 30% crunch has increased interest in outsourcing. 20% 10% 0% Yes No Given the current focus on cost reduction for many companies, this may appear to be a somewhat surprising finding. However, based on our experience, many companies who would be potential outsourcing candidates are delaying their decision making process and therefore interest in outsourcing is on hold. There is also a dependence on the type of outsourcing being considered – any deal that would require upfront investment will clearly find it more difficult than a proposition which reduces costs, without significant capital investment. Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 3
Outsourcing/ offshoring seen as having a positive impact on domestic businesses Main effect outsourcing / Offshoring has on dom estic businesses 60% 50% 40% Over 80% of respondents believe 30% outsourcing / offshoring benefits domestic 20% businesses, contrary to general perceptions 10% within the general media and the rhetoric 0% expounded by some politicians. Less than Positively helps Helps cut costs No real impact Detrimental to all Detrimental to in terms of and improve local businesses the SME market 5% believe outsourcing / offshoring has a productivity and profitability in the local detrimental impact. efficiency economy Most believe the key benefit that outsourcing / offshoring brings is with respect to productivity and efficiency, whilst cost savings is close behind. This would suggest the industry has now matured to a stage where the proposition is not simply one of cost cutting, but about additional value add. Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 4
Outsourcing / offshoring also seen as having a positive impact on the domestic economy Main effect outsourcing / Offshoring has on dom estic econom y 60% 50% 40% 30% Again the vast majority of respondents 20% believe outsourcing/ offshoring has positive 10% 0% benefit on the domestic economy, with Positive, as it Potentially Positive, as it Damaging, as Will be around 60% stating that access to new helps the positive as it eliminates the the economy detrimental to the skills and labour are the principle drivers. domestic gives access to need for more has to rely on local market, as economy new skills and immigration other countries w e w ill transfer compete w ith labour our know ledge This is not unusual, given the aging the emerging population of developed economies and specific skills shortages in some high technology areas. Around 25% believe outsourcing / offshoring enables developed economies to compete with emerging economies, whilst around 10% believe it will damage the economy in terms of reliance on other countries and transfer of knowledge. Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 5
Data protection and IP theft still a real concern for offshoring View of Data protection and IP theft w ithin Offshoring 60% 50% 40% Given the general positive perception 30% 20% towards outsourcing and offshoring, 10% concerns remain about data protection and 0% intellectual property theft, with over 60% It is a real problem I believe it may be a Not actually that The government is believing it to be a real of potential threat. and threat problem in some important - has been probably actually cases blow n out of w orse proportion by the media 10% of respondents believe the government is actually worse when it comes to data protection – not surprising given the recent experiences of the UK government…. The industry must continue to address the real concerns of organisations wanting to offshore, if the industry is to continue to grow. Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 6
Selection of processes and functions for outsourcing seen as key driver in gaining maximum return from outsourcing investment Most im portant actions in gaining m axim um return from outsourcing investm ent 70% 60% 50% Not surprisingly, a majority, in excess of 40% 60% believe selecting the right processes 30% 20% and functions for outsourcing in the first 10% 0% place is the best means of getting Reintegration plan maximum return on their outsourcing Prior process Rigorous quality Selecting the right the conclusion of processes/functi business plan optimisation of processes at systems and the agreement Exhaustive processes outsourcing planning, investment. on for However, what is surprising, is that only around 5% believe a well constructed reintegration plan of processes at the conclusion of the agreement as being important. This would seem to suggest most organisations that outsource, don’t expect to bring those processes or functions back in-house, rather, that at the conclusion of the first agreement, either they will renew the agreement, or transition to another supplier – or perhaps many just don’t realise how important reintegration is… Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 7
India remains first choice offshore destination First choice destination is India - w hy? 70% 60% India still leads by a long way in terms of 50% organisations first choice for an offshoring 40% destination. 30% 20% The top two drivers are the availability of 10% 0% skilled workforce and India’s existing Access to Labour costs Language Skilled w ork Existing track track record. resources force record What is surprising and bodes well for India, given its problems with wage inflation and dollar exchange rates, is that less than 20% choose India due to lower labour costs. Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 8
Philippines and China competing for joint second choice for offshoring destination - but for different reasons Second choice destination is Philppines - w hy? Second choice destination is China - w hy? 60% 80% 50% 70% 60% 40% 50% 30% 40% 20% 30% 10% 20% 0% 10% Access to Labour costs Language Existing track Economic 0% resources record stability Access to resources Labour costs The Philippines comes joint second with China, but for China competes with the Philippines for second choice, very different reasons. Most organisations choose but primarily driven by the search for lower labour Philippines for its language capability and would concur costs, where of 70% of respondents rated this as being with a recent trend of call centre outsourcing heading the most important driver. Access to resources was the towards the Philippines. Many respondents also view the only other driver for choosing China. Philippines economy as being stable. Clearly India, Philippines and China all offer quite different value propositions and in many ways compete for different aspects within the outsourcing sphere: - India for specialist skills (e.g. ITO and KPO) - Philippines for customer facing language skill sets (e.g. Customer centric BPO) - China for general back office, lower skilled BPO and those not needing significant English language interaction Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 9
About Op2i • Op2i is a business improvement firm, helping organisations transition and transform their business through Global Strategic Sourcing, providing advisory, implementation, brokerage and managed outsourcing solutions. • We help client organisations exploit resources, partners and markets in order to innovate, differentiate and win in a convergent world. • Our services include: advisory support, training, project management, governance and arbitration services throughout the outsourcing lifecycle. • Our brokered services tailored to the technology industry, offers our clients: – Fast track outsourcing; – Lower / shared risk; – Offshoring with onshore assistance; – Seamless transition; – Domain expertise; – Sustainability; and – Flexibility Managing Risk – Delivering Value™ www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd 10
www.Op2i.com Contact Op2i for more information on the survey or assistance with your outsourcing needs Bharat Vagadia LLM, MBA, B-Eng, DipM Op2i Ltd Mob: +44 7711 898089 Fixed: +44 207 193 4339 Email: Bharat.Vagadia@Op2i.com The survey is available at http://www.proxi.co.uk/op2i 11
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