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Outsource magazine: thought-leadership and outsourcing strategy | August 18, 2017

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Sourcing unravels in the Arab world

Sourcing unravels in the Arab world
Jerry Durant

Just about anyone can write a piece about current events and even go so far to paint the future. Heaven knows that prophesy is seldom remembered or referred back to. Then there are those that articulate the “would have, could have and should have” actions expecting that we can engineer ourselves out of these situations.  What we need to address and understand is that the world that we live in is a very different place and that logic is not always the route that mankind takes in addressing issues.

On the uprisings in Tunisia, Egypt and now Jordan, one has to ask oneself whether or not this reflects such a drastic change in the Middle East that it will all but negate sourcing as a service within these regions.  Over the last decade these countries have invested serious money in developing education, facilities and technologies to be globally competitive.  The interest has been slow, largely because of buyer reluctance surrounding regional stability.  Some ventured forward based solely on delivery capability while others turned away because of these concerns.

No one was really prepared for what is happening now in Egypt, not even the allies.  At best there was rumblings on social networks over the preceding six months, with an increase at the onset of unrest in Tunisia.  But, as we all know, words are frequent and actions are not always to be expected.   While there is some degree of acknowledgement that local issues were not at their best one could also say that they had deteriorated during the course of several years.  Some of these may be the direct result of relationships that had been neutered with the West but largely it’s the result of these countries having some really great people that were making vigilant attempts to create an emerging clean industry for the betterment of their society.  Overnight the feeding frenzy and the abolition of civil dialogue has turned to mayhem.

During the course of events telecom, media and internet services have been curtailed.  Not only did this create internal isolation but also a veil of disconnection with the outside world.  Companies that trusted in these regions are left wondering what to do and where does their work now stand.  Whether buyers engaged call centre services or simply used a small cottage business to develop a website (and possibly support it going forward) there remains a big question mark over whether any sort of relationship can endure past these series of events.

Unrealistic preparedness

What hasn’t been done in outsourcing is to talk about the real social realities that exist.  Recently two separate posts suggested that Egyptian companies (and buyers) should consider channeling a backup relationship to Israel or Bahrain.  This was a bit amusing given the conflicts and contention that exists between the Arab and Jewish sectors.  Bahrain, while an Arab cousin would still leave buyers with justifiable concerns over the further spread of conflict across the Middle East community.  It is important to emphasise that these are human social issues that underscore the importance of understand global events and potential challenges that your sourcing decision faces.

One might think that these events, especially if not engaged in a Middle Eastern relationship, would make one impervious to these sorts of matters.  On the contrary similar situations exists in just about every country and region around the globe.  If not based on social disruption it can take on the form of monetarily contentious and global-trade-related topics.  What is unfortunate is that this is not something that you can look up in a book, and you may not be able to rely upon office-based analysis from people who have not lived in these regions.  Despite this lack of qualifiable expertise buyers can look at both their view as well as the realities from the regions that they are considering.  It’s a question of context that drives the question of stability.  What might be viewed as dangerous or undesirable can sometimes be the norm.  That very norm is one in which local protection has been provided to reduce the risks and compel assurances for service delivery.  A part of any venture suggests the need for having a plan – and a Plan B should events take an unexpected turn.  Retrosourcing is often overlooked because of a sincere belief that our analysis has addressed all possible outcomes, when often that isn’t the case.  Without a retrosourcing plan buying decisions gone differently than anticipated fall prey to chaos and difficulties in taking on a new track (or supplier).  I can speak to this from personal experience when we mobilised a transition from Beirut to Athens; the chaos, the gaps in attention, and the costs were enormous.  Despite these repeated examples buyers and suppliers are still repeating the practice of inattention to these skeletal contingency plans.

Cloudy day

A colleague suggested to me that a cloud sourcing paradigm could have addressed this shift in support.  Certainly in terms of technology switchover this would have been a useful tool but the challenge surrounds that area of human capital.  Even for the most rudimentary sourcing efforts the shift of effort from one to another is not something that is automatic or immediate.  Questions surrounding the level of duality, security/data protection, and validation of the effectiveness of the plan are essential mandates for having a moderate degree of success.

As we have seen over the course of the last 3-5 years the mega deals are becoming fewer and fewer in order to reduce impact risk.  In some ways the same has been done strategically by taking proactive attention to not put all of your enterprise in a single sourcing destination.  Natural and manmade calamities will occur during some point in time; it’s just a matter of time.  Some are on such monumental scales that they consume even the most ambitious protection that we undertake. Two examples, which both occurred in the United States, were Hurricane Katrina and 9-11.  Both overwhelmed plans and threw matters into chaos.  The lesson to be considered by fledging emerging nations is to have a plan for social order in order to diminish the impact on future generations.  No leader, selfish or not, wishes for any uprising to isolate and destroy the hopes for the future.

Fallout

It doesn’t require a large amount of armchair analysis to predict the impact that this will have on outsourcing in the Middle Eastern countries. According to the World Bank the Middle East is operating with a 10.7%+ unemployment rate with a conservative estimate of nearly 300,000 in the sourcing sector. The combination of a rising unemployment rate combined with growth in green sourcing sectors creates a clash within cultures.  As a result of discontent and without a substantial base in the growth sector all is in jeopardy of immediate turn collapse.  Recovery will be greatly dependent upon regional stability and an enhanced agenda for sector risk reduction.

The bigger question is whether these events go beyond simply the Middle East.  With a growing risk focus by buyer nations, combined with mounting domestic anti-sourcing sentiment will this precipitate a rethinking of sourcing as a solution?  It is without question that some who were contemplating will re-examine their proposed initiatives.  Others will examine their present decisions and start taking measures to reduce risk to a level which is tolerable.  The big players will suffer from paralysis due to the enormous effort required to offset the regional effect catalyst.

Unlike foreign supplied commodities where you can rapidly shift to alternative suppliers crafted and customised sourcing relationships are far more difficult to redeploy.  While some would suggest that it’s a simple lift-and-drop situation these generic engagements are rare.  Every company chooses a supplier such that a unique and carefully crafted relationship can be provided that to a large extent mirrors their business.  The longer the relationship the more unique and specialised they become, making it far more difficult to retrosource even when a qualified supplier is available.

There is NO conclusion

Unfortunate events regardless of course have ramifications.  There is no doubt that the benefits of a sound and reliable sourcing relationship exist.  The question is whether the external influences that are left in the hands of others have dealt a fatal blow, or whether this is a setback that will require creative rethinking to overcome.

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