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Outsource magazine: thought-leadership and outsourcing strategy | September 24, 2017

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Quality trumps cost-cutting in outsourcing shift

Quality trumps cost-cutting in outsourcing shift
Daniel Sasaki

Businesses are increasingly prioritising quality over cost in terms of which countries and which firms they turn to for their outsourcing needs. Companies are seeking more sophisticated skills and capabilities to adapt to the ever-faster pace of change in business and deliver the higher-quality products and services vital for survival in the still-tough economic climate. Also, in searching for increased skills, businesses are progressively looking to outsourcing countries which are moving up the value chain and improving the quality of their outsourcing offer.

Those businesses that succeed in mastering the trade-off between cost savings and quality should see enhanced productivity and performance and in today’s commercial environment producing the best results is increasingly driven by how quickly and easily firms are able to embrace and adapt to technological and digital change.

It’s no surprise therefore that in the drive for better-quality services and access to skills and capabilities, the key weakness businesses are trying to address is a lack of in-house technology knowledge, as a recent KPMG international survey of 630 ‘client-provider’ contracts worth £14 billion revealed. For example, 51 per cent of the survey’s respondents did not think they possessed the required skills for cloud and app-based technologies.

Today, we are living in an age of a faster flow of information and communication, which is increasing business complexity. This new environment is characterised by “far-reaching technological advances, and a consumer … whose fickle preferences are revised with the speed of a television commercial” as the authors of The Centerless Corporation, a much-acclaimed book that purports to put forward the model for the successful corporate of today, put it. The fall of firms such as Jessops, HMV and Blockbuster Video show what fate awaits companies that fail to adapt.

Traditionally, when cost was the main factor, countries such as the Philippines or Thailand were viewed as ideal outsourcing partners. However in searching for high-quality outsourcers, particularly in the technology arena, businesses are starting to look further afield to the countries that have been quickest to respond to businesses’ changing priorities.

Some of the countries that companies have traditionally looked to for their outsourcing needs have been swift to react. For example, 70 per cent of Indian outsourcing vendors have implemented international quality certificated standards such as ISO and Six Sigma. This is contributing to India being constantly ranked highest in terms of the quality of its outsourcing sector.

China is expanding its IT outsourcing capability, with special zones such as Chengdu High-tech Industrial Development Zone and Chengdu Economic and Technological Development Zone. Mexico too is rising to the challenge by accelerating investment in IT education, with Mexico City alone now producing over 13,000 IT graduates every year.

A number of cities are raising their game and it’s perhaps not surprising, given the increased focus on quality and technology, that many are from developed countries. One of the newest entrants on the Tholons Emerging Global Outsourcing Cities list is Toronto, Canada, which boasts established R&D activities, a skilled talent pool and world-class IT and infrastructure.

Businesses that orient their outsourcing to help meet the new demands of today’s digital and technology age will stand a much better chance of joining companies such as Apple, Amazon and ASOS on the economic uplands than in the valleys where those that fail to adapt and keep pace are destined to rest.

Toronto image courtesy of Richard Cavalleri / Shutterstock.com

Chengdu image courtesy of TonyV3112 / Shutterstock.com

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