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The Outsourcing business – fears from the past, predictions for the future

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Back in 2012, US president Obama proposed a series of  tax measures aiming directly at the outsourcing business, and encouraging companies to bring their projects and offshore centers back home, in the United States: “Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed,” he said.  At that particular time, the proposal seemed more as a prediction and many people expected a downfall in terms of outsourcing abroad, especially in India and the Philippines – a hub for this particular line of business.

However, US multinational companies reacted: offshore operations are essential to gain foothold in emerging markets, the simple action of outsourcing a certain part of your business can represent a major plus for your business, it cuts costs and help the company grow. As a direct result, that fact alone can support the employment in the US. Furthermore, such action would hurt the country’s global competitiveness and sales figures would continuously decrease. There is a reason behind the decision taken by companies to outsource: that’s where the sales are, and that’s where the profit is made.

As a direct consequence, we can affirm that this particular line of business is more alive than ever: the process of reaching to those who can produce a service at a lower cost is called “comparative advantage” and it represents the key ingredient to an efficient and productive economy. That means that US customers get cheaper prices for example.

We have to also take into consideration the general misunderstanding of the term “outsourcing”. Many believe that companies from mother countries simply let go their employees and hire new workforce in other parts of the world. While sometimes that happens, it is not a general behavior. Companies can also build “in house centers” in foreign countries – building stores, factories or departments and hire the people working there to take care of the business. Those are company employees, both belonging to the “mother” country as well as locals. We also have to mention the language barriers: how can a company have a well deserved profit doing business with a foreign territory if the language spoken there is not mastered in a proficient manner?

The final figures for the Outsourcing revenues in 2013 are not final yet, but during last year, we were expecting, from IT outsourcing alone, a figure of over 288 Billion USD to be registered as profit by the USA alone, with emerging markets in Europe, Asia Pacific, Latin America and China growing more than 13% (Gartner numbers reveal). “IT outsourcing markets in the Asia-Pacific, Latin America, and Greater China regions will climb over 13 percent this year and next, bolstered by multinational corporations expanding into these markets and positive economic conditions” Gartner said.

With these figures in mind, and with all of the above information, we can be hopeful that the outsourcing business will not be jeopardized and will continue to expand and grow all over the world, discovering new markets and opportunities and successfully face new challenges!

Author : Daria Ionescu

Outsourcing Advisors

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