What Is Your Company's Global Sourcing Strategy?
By Mark Briggs | 70 comments
A Premier BPO, Inc. White Paper By Mark Briggs, CEO
The ability for virtually every company in America to answer this question with certainty and confidence may make the difference between their success and failure. On an increasingly frequent basis, corporate executives facing pressure from their responsible boards who, in turn, are responding to shareholder questions and concerns, are asking this question: “What is our company’s Global Sourcing Strategy?”
In fact, if companies have yet to begin to formulate and develop a Global Sourcing Strategy, they are already behind the curve. If these companies are not experiencing the negative results of inaction and “analysis paralysis” now, they certainly will be in the very near future. In addition to falling far short of the competition in value proposition in pricing, response and expediency, these negative results will take the form of further serious deficits in productivity, efficiency, and quality. When asked to identify the values they expect to receive when they outsource any function, responsible, savvy financial executives have consistently answered that outsourcing of their non-core competencies remains a standard if not indispensible tactic for reducing costs and focusing resources on core business activities, according to a recent IOMA survey. Approximately one-third of these executives view outsourcing as a valuable source of third-party expertise. Most of these financial officers still place outsourcing in a cost-reductions and efficiency-enhancing role.
Gartner Group estimated that by the end of 2004, more than 80% of US executive boards will have discussed offshore outsourcing and more than 40% of US enterprises will have completed some type of pilot or will be sourcing services through a global delivery model offshore. This translated to projected growth of BPO revenues in India alone of $1.2 billion in 2003 to $13.8 billion by 2007. Worldwide, the BPO market in 2003 was $122 billion, up from $110 billion in 2002, a growth of 10.5 percent. Moreover, “the movement of US service sector jobs overseas (were estimated to) accelerate even more rapidly than initially projected over the next two years, as the cost savings from offshore outsourcing become better publicized and opportunities expand to move jobs abroad,” according to a May 17, 2004 report by Forrester Research, Inc. of Cambridge, Massachusetts. The Forrester report predicted that a staggering 830,000 service sector positions will migrate overseas by 2005. This figure becomes even more dramatic when one considers that it is 240,000 positions more than the forecast Forrester made in a widely cited study in November of 2002, increasing the total predicted service sector jobs which will move overseas to 3.4 million by 2015. Now, in 2010, we have found that these statistics were highly conservative and the growth much more exponential.
Just as our society has experienced massive growth with the advent of new inventions and socio-economic phenomenon, we are once again experiencing a mega-trend that cannot be responsibly ignored. To ignore the global sourcing hyper-trend is to do so at one’s own vocational peril. Modern companies on the cutting edge can no more ignore this powerful opportunity for multi-phased leveraging of offshore sourcing than the companies at the turn of the century could maintain progressive success by ignoring the steam and combustion engines. Today’s corporate entities can no more choose to not participate in the benefits of global sourcing than those of the forties could turn a blind eye to electric power and mass production.
Likewise, the beneficial changes and powerfully positive aspects of global sourcing today are directly analogous to the great strides in automation of the fifties and sixties. To extend the analogy to more recent times, the corporations of today can no more refuse to address the issue of “what is your Global Sourcing Strategy” than could the companies of the eighties and nineties remain mute when asked, “what is your Internet strategy?” Moreover, in the final analysis, to answer these questions of the past was essential. To answer these questions immediately and on the front end of the respective trends resulted in massive success. To ignore these questions, in many instances resulted in failure.
Thus, such an historical analysis, begs the question, “what is your Global Sourcing Strategy?” In order to realize cost reductions and enterprise-wide improvements, the most productive and certain response to this question is the utilization of Business Process Outsourcing (BPO) for select processes. For the prepared, efficient and successful company of the twenty-first century, the issue is not, “if we will develop a Global Sourcing Strategy” and not even “when will we develop a Global Sourcing Strategy” but “what is our Global Sourcing Strategy NOW?”
Perhaps Bill Gates most clearly stated the reasons for the impending success of those companies who wisely develop a Global Sourcing Strategy. Microsoft developed and has implemented a Global Strategy almost from the outset of their company’s existence. In recognizing the indispensable requirement for such a strategy, Gates stated as early as 1999, that “as a business manager, you need to take a hard look at your core competencies.
Revisit the areas of your company that aren’t directly involved in those competencies, and consider whether Web technologies can enable you to spin off those tasks. Let another company take over the management responsibilities for that work, and use modern communication technology to work closely with the people – now partners instead of employees are doing the work. In the Web work style, employees can push the freedom the Web provides to its limits.” In a more direct rendition of the concept, Gates further asserted, “An important reengineering principle is that companies should focus on their core competencies and outsource everything else.”
Like Microsoft, many US-based service companies such as IBM Global Services and Electronic Data Systems have responded by adding new offshore facilities to their mix. GE saves about $350 million per year through the 18,000 employees it has offshore. American Express, Oracle Corp., Daimler Chrysler, Amazon.com, Reuters, Aetna, AT&T Wireless, Delta Airlines, Deloitte Consulting, Southwestern Bell, Metropolitan Life Insurance and a whole host of federal, state and municipal entities nationwide are outsourcing billions of dollars of back office function expenses offshore. Likewise, Wall Street’s top firms such as Lehman Brothers and Merrill Lynch are investing heavily in offshore outsourcing of both information technology and operations functions
A strategic assessment of your company’s business processes provides a solid foundation for your company’s Global Sourcing Strategy. Companies need to evaluate their business processes and not only identify the right processes to outsource but also determine the delivery model that will best support these identified processes. The most successful companies of the future will be those companies that seek strategic alliances with the right business partners to reap the benefit of their Global Sourcing Strategy. The optimum method for formulating such a strategic alliance and assessment is to partner with a BPO provider who can provide a sound sourcing strategy which involves careful reexamination of your company’s back office processes. The sooner corporate executives wrap their minds around these concepts and embrace the proficiency and cost-saving proclivities of an effective Global Sourcing Strategy, the sooner they will not only survive but will thrive.
When considering such an Offshore Outsourcing Strategy, it is our hope that you will consider Premier BPO, Inc., a proficient, established, committed Provider with a leadership team who possess a collective 125+ years of experience in Outsourced Services to Fortune 500 companies and other progressive first mover companies.
For more information concerning this subject including case studies, white papers and other data, please visit http://www.PremierBPO.com or call our CEO, Mark Briggs or our President, Jeff Michel at 931-551-8888.
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