Outsourcing: Debunking the Myths and Best Practises

The CIO of services provider Deloitte has sought to dispel some of the myths surrounding outsourcing and insisted it can help organisations streamline and save costs.

Outsourcing as a practice remains strong, Larry Quinlan, CIO of Deloitte, asserted during a keynote address at last week’s Global Sourcing Forum and Expo in New York City. Despite his pro-outsourcing bent, however, Quinlan also acknowledged the arguments of those who feel that off-shoring is ultimately detrimental to the US economy.

That conference featured a number of CIOs, including Discovery Communications CIO David Kline, discussing ways in which companies could most efficiently outsource their IT and other assets. While many of those speeches and discussions focused on the more technical aspects of offshoring, Quinlan’s speech took a more philosophical bent, focusing in a large part on dispelling what he termed “myths” about the outsourcing industry.

Quinlan’s remarks come during a somewhat transitional time for the offshoring industry. Although the trend of companies shipping work to other countries is unlikely to end in the near future, competitive trends such as in-country outsourcing to US rural states have arisen in recent months.

In a BusinessWeek survey of 100 CFOs conducted earlier in 2009, some 22 percent cited the US as a location to which they’d consider outsourcing in the future, followed by China at 16 percent, India at 13 percent, Southeast Asia at 7 percent, and Latin America at 7 percent.

DbaDirect, an outsourcing company specialising in database administration services, told eWEEK that “a global presence allows his company to compete on price with the companies that are totally offshore, as well as take on US-based projects that need quick turnaround.”

In conjunction with an anemic economy just beginning to claw its way from the depths of the biggest downturn since the Great Depression – forcing many businesses to cut back on their outsourcing spending – and a presidential administration that may impose measures to encourage jobs to stay in the US, some traditional outsourcing locations such as India are perhaps justifiably concerned about the future. For their own part, some companies that previously jumped into outsourcing with both feet have evidently been starting to voice concerns about the process.

Quinlan seemed intent on assuring his audience that many of those fears that had cropped up about outsourcing were largely unfounded. Using data he said was internally generated by Deloitte, he offered the following rebuttals to what he said were widespread fallacies about outsourcing:

Offshoring Shared Services Has Not Been Successful

“That’s absolutely not true,” Quinlan said. “We’re seeing significant upticking in global offshoring activity.” With the maturation of the offshoring market, there has been an accompanying decrease in the hype and media attention devoted to the process; but nonetheless offshore continues to grow in scale and complexity.

Adding to the potential appeal for US companies is the economic recession which, Quinlan added, has helped suppress wages outside of the US; meaning that “wages in the offshoring centres are not catching up with US wages anytime soon.”

Offshore Labour Pools Have Been Exhausted

“Offshore labour pools have not been exhausted in any significant way,” Quinlan said. Apparently, he had received complaints from some executives saying that they had a hard time finding suitable personnel in companies such as India and Brazil; Deloitte’s internal research, however, apparently showed a suitable labor pool in most of those locations.