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Article by Mohan Babu


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.




About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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