2018 is not the first time our industry has come under fire. It’s had a colourful history from tales of cost-cutting to ethical arguments around driving labour arbitrage. Outsourcing has often been misunderstood and the whole industry blamed when things go wrong. But with the recent, spectacular collapse of Carillion we are seeing a renewed attack from certain corners in relation to the “failure of outsourcing.” A grand, sweeping statement, but is there any truth in it?
Outsourcing decisions often come down to a relatively simple cost-driven Return on Investment (ROI) calculation: how much will the cost change in each scenario and how quickly can that investment be recovered?
On the surface, this purely economic approach seems appropriate enough. After all, economics are certainly important. But over-reliance on purely financial-driven outsourcing decisions is one of the biggest causes of the “strategy-to-execution gap,” namely the distance between a company’s business strategies and its ability to execute on them.
This month’s Academic of Outsourcing tribute goes to Douglass C. North for his work on “new institutional economics.” North – a professor, economist, philosopher and economic historian – was the co-recipient (with Robert Fogel) of the 1993 Nobel Prize in Economic Sciences “for having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change.”
When a business is choosing which company to outsource with, location can often be overlooked in favour of the most appropriate specialist for the project. However, location – and especially proximity - should be a critical part of the decision process. For example, if your company is based in Europe, it will be more difficult to outsource from a provider based in Asia, due to a mixture of time, travel, language, and perhaps cultural differences.
By now everyone knows about outsourcing, the big issue of the 20th century that revolutionized the 21st century. But outsourcing didn’t start in the 20th century. In the 18th and 19th century Europe developed Imperialism, setting up colonies around the world. These colonies provided the language skills and education systems that made offshoring possible.
This month’s column features big thinker Ronald Dworkin. I like Dworkin because he tackles and integrates major ideas in ethics, morality, equality, justice and the “unity of value.” One of his most famous of many books is entitled Justice for Hedgehogs.
Don’t let the humorous book title fool you; there’s no question that Dworkin is a heavyweight. Dworkin is a Professor of Philosophy and the Frank Henry Sommer Professor of Law at New York University and Emeritus Professor of Jurisprudence at University College London.
This week’s column focuses on big thinker Ronald Coase. Coase, a giant of modern economic science and 1991 Nobel laureate helps us understand a key fundamental of business: that business (and outsourcing decisions) are a math problem.
While outsourcing has been in the limelight for some 20 years, various threads of economic thought and research stretching for more than 80 years planted the seeds of modern outsourcing, centering on growth theory, transaction costs, game theory, property rights, deregulation and the nature of the firm.
A common question when considering Robotic Process Automation (RPA) is what process would be the most optimal one to automate. When looking for a candidate process, you should be focused on a couple key requirements. First, you will want to identify a process that is rule-based, so it doesn't require any human judgment capabilities in its operation. If you have processes that have human-judgement elements, they may still be suitable for RPA but you'll need to hand out that portion of the work to be done by an individual and then pass back it back to the robot.
Customers embark on an RPA journey for a variety of reasons. For some it's about not being able to grow organically with the traditional models of adding new people into the mix. For others, it can be a desire to achieve greater cost certainty and overcome the challenges of moving work offshore and the uncertainty that it brings into today's political climate. Regardless of the reasons why companies embark on the journey, a common outcome is sought - a high-quality service with a reduced cost of operating.
Almost every week in the last few months someone has asked me about the general mood on the streets of Bangalore. What are the IT professionals in the Silicon Valley of East making of the changes in the industry? How is the senior management of offshore headquartered service providers preparing for the future? While there are several versions of the predicted future, everyone agrees that this is a watershed moment in the evolution of the IT outsourcing and offshoring industry.