Wednesday, January 30, 2008

Outsourcing Tsunami: Global economic drivers will accelerate the pace of change

Source: Transworldnews

The tsunami of sourcing has only just begun, says outsourcing industry visionary Ben Trowbridge, CEO of outsourcing advisory firm Alsbridge. In his 2008 predictions released this week, Trowbridge believes landslide economic drivers will continue the global redistribution of labor to its natural location and push offshoring and outsourcing to new heights. The speed of this move will be driven by continued high energy costs, the restriction of capital access driven by the sub prime meltdown and low unemployment in technology and accounting.

These forces will drive providers and buyers to evaluate more clearly their options based on the emerging economic facts of 2008. Trowbridge says outsourcing providers and buyers will make strategic decisions in 2008 based on how their business is affected by the sub prime market, oil price increases, offshore wage inflation and the falling value of the U.S. dollar.

“Even though the last few years have seen a strong economy, outsourcing has continued to be a major strategic driver for the top 1000 U.S. companies,” says Trowbridge. “The slowing and changing direction of the economy has caused the boardroom to evaluate yet again steps to control costs and an even greater interest in outsourcing to offshore locations.

Trowbridge predicts the following outsourcing trends for 2008:

Currency issues will plague the entire outsourcing community, lengthening sales cycles and increasing legal debate about price increases. This will drive the need for expanded benchmarking to define the real issues. The weakening dollar will drive companies to evaluate regions that are closer or that have fewer fluctuations in their currency against the dollar. The uniformed that rely on Google facts will worry about labor cost inflation not understanding the true issue.

Access to capital driven by the distress in the sub prime mortgage industry will continue to ripple through business, driving a need to reduce SG&A and improve financial performance.

Outsourcing will increase dramatically in the mid-market which will cause the outsourcing providers to re-think their cost of sale.