Predicting the role of outsourcing in 2010

Another area high on the list this year is ­climate change goals and how businesses can adapt and innovate to combat global warming. Though the Copenhagen Summit last December was not as productive as many had hoped, it did put ‘green’ issues back on the media and business agenda. There is also talk it will be the area in which taxes might be raised to start plugging that fiscal deficit.

Having proven to some degree that saving energy and waste does save money, there are some promising noises coming from the business world that may precipitate an increased adoption of green procurement requirements for new contracts. This year is expected to see environmental impact embedded further and deeper into sourcing than before: the NOA has launched a steering committee on the issue in a drive to guide the ­outsourcing industry on this.

Lest you forget
These environmental concerns will increasingly come back to bite those who thought they had been forgotten in the recession. The Carbon Reduction Commitment (CRC) coming into force and the number of ­suppliers building their green credentials will make plain that this is a serious ­consideration. Companies will be forced to look beyond their own ­backyard and understand their end-to-end emissions more fully.

This year will also see more innovation in green services and products that impact an organisation’s business process outsourcing (BPO) credentials. Legislation such as the CRC, though it has some interesting side-effects in sourcing, comes with new BPO opportunities. There are already companies ­taking up the ‘carbon accounting’ challenge, using BPO processing capacity to help companies understand their overall carbon footprints. Such services look set to become increasingly popular.

In terms of offshoring locations for UK businesses outsourcing various operations, many lesser names will come to the fore this year. China will gain ground as a call centre player, while the Philippines and Russia will increase in prominence on the world stage in BPO and IT outsourcing for companies across the world. Brazil is also expected to take a bigger role in IT outsourcing. Lower-­volume players such as Mauritius, Sri Lanka and emerging African countries should come to prominence, while more location ­specialisation – for instance focusing on finance or ­elements of IT delivery – should emerge as countries recognise that global outsourcing cannot grow interminably.

There are many more ­questions over where this will go in 2010. With optimism rising in the private sector, will ­companies increasingly use outsourcing to seize growth opportunities and re-skill? Or will they continue to squeeze ­budgets and suppliers? Likewise, will the public sector bite the bullet and start outsourcing with a vengeance? Or will cash-strapped companies stubbornly defy reality and cut more staff to the point where each employee is doing his job, that of his boss, the cleaning lady and the postroom boy?

Outsourcing among SMEs
A relatively new entrant to the outsourcing fray in 2010 will be small-to-medium enterprises. Recent research from Slasscom, the Sri Lankan IT and services development body, found that almost a quarter of UK SMEs are considering offshoring, while one in ten are “very likely” to offshore elements of their businesses in 2010.

The National Outsourcing Association predicted a rise in SME outsourcing a while ago and, though it didn’t happen immediately, it is definitely on the up. The growing availability of small company-focused locations and providers will be an additional pull. It is also likely that integration of new virtualised platforms and cloud computing offerings will make it easier for smaller businesses to work with outsourcers further afield. Research from Easynet Connect, an internet service provider that supplies specifically to SMEs, says half of UK SMEs will have moved onto cloud computing by 2011 – an impressive figure and impressive speed, if it turns out to be true.

However, there are still sceptics as to how rapidly ‘the cloud’ will be fully adopted. Currently, investment in the area by SMEs and larger companies is frequently done in a piecemeal fashion or in rare, company-wide overhauls. The Guardian Media Group’s move to Google is an example of this. Some worry that SMEs are not doing the right groundwork to prepare for a transition to cloud computing. So, though its use looks set to increase, it may not happen as rapidly as many presume.

Martyn Hart is chairman of the National Outsourcing Association