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Outsourcing
and geopolitics
Outsourcing helps organisations focus on their core competence, relegating
other non-core functions of business to specialists who can do it cheaper
and more efficiently. MOHAN BABU writes that corporate America is now
realising that along with the rewards of outsourcing, come the risks
In my
previous column, I had talked about outsourcing and the reasons boosting the
move towards outsourcing in the US. Although there are a number of
compelling reasons leading to outsourcing and BPO services to India, the
recent standoff between nuclear powers India and Pakistan has piqued the
interest of corporate America, in not just the geopolitical climate in South
East Asia, but in the outsourcing of critical services and business
processes to companies in the subcontinent. A number of business and trade
magazines and publications have been running articles on just this topic,
questioning the dependence of core American business functions on foreign
countries.
There is
little doubt that outsourcing as a business model is one of the best ways
for large companies and organisations to streamline their operations and cut
costs. Outsourcing also helps organisations focus on their core competence,
relegating other non-core functions of business to specialists who can do it
cheaper and in a more efficient manner. Along with the rewards of
outsourcing, come the risks. In most cases, the risks of outsourcing can be
controlled and mitigated by methodical contingency planning. It is only when
unexpected changes in the political or economic climate throw a spanner in
the works that the executives hit the panic button.
Although the
current Indo-Pak standoff has not led to a panic re-thinking in American
industry, moving forward corporate leaders will probably factor the regional
instability into their planning. In a climate where even companies with
Indian operations, such as Hewlett-Packard, Sun and Intel too are banning
non-essential travel to India, there is bound to be some thinking about the
long-term impact of regional instability. Even for the Indian software
sector, worth about $7.7 billion in the past year, with two-thirds of its
customer base in the United States, this is a time to reflect on the
long-term impact of the geopolitical changes taking place.
For the
common man in India, skirmishes on the border do not spell doom, but in the
current economic climate (especially after September 11) businesses in the
US are really jittery at the thought of any “worst case” scenario. For some
of them, outsourcing an entire BPO or system maintenance operation to India
is akin to putting all the eggs in one basket.
Considering
all the aspects of outsourcing, especially our strengths, I don’t mean to
imply that Indians will lose out in the outsourcing race. On the contrary,
the renewed focus in the media will only help strengthen our position in the
global marketplace. However, the current situation can also be seen as a
blessing in disguise. The expertise that Indians have built in global
outsourcing will help us move up the value chain by “exporting” our
expertise to other nations looking to move into this arena. A few nations
with an English speaking populace like Philippines, Singapore, and Ireland
immediately come to mind. If a few Indian companies can balance their
operations by
moving a part
of the operations to one or more of those countries, this will automatically
provide an added level of comfort to the global clients. This would make for
a win-win partnership both for Indians who can move up the value chain and
for the host nations who will be glad to get a slice of the outsourcing pie.
Even for
individuals, this kind of a move will help in the long run, especially as
companies move up the value chain, they will be able to broaden their
skill-sets and breadth of management expertise. The slightly liberal visa
rules in other countries will aid Indians who wish to travel back-and-forth.
Corporate
memories are short and the current conflict and risks may soon be forgotten,
but Indians will be advised to start hedging their bets and take in the big
picture. Becoming global outsourcers may be the next step.
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