The world is far from flat. And, we have just begun to see the impact of globalization. Outsourcing will be the greatest economic leveling force in mankind's existence, says the President and Founder of the Delphi Group Thomas Koulopoulos.
What are your view on outsourcing in the light of globalization? Outsourcing's move to the services sector has caused us to re-think some of the most basic tenets of successful sourcing partnerships--the ones that didn't just hand off a function to a partner but architected it the way a partner would actually operate as an insider. The objective should be to integrate processes and increase innovation across every part of your organization.
What's the tradeoff between low cost services and innovation? You have to consider that the foundational value of "lower costs" is table stakes for a partnership. Twelve chief sourcing officers of the world's largest organizations, I spoke to, felt that the sourcing providers were so driven by lower cost that they had become myopic, missing out on the strategic value that they could add. They saw an absolute lack of "innovation" coming from their suppliers. So, providers need to get more strategic about adding value and start innovating in the businesses they serve.
What is lacking when it comes to customer satisfaction? Innovation very rarely finds its way into the mechanics of a contract. The customers and providers should define what innovation means to them; allocate budget for it; create a mechanism for good ideas to be evaluated, tracked and measured; take time for SLA integration of innovation; provide profit-related performance for provider when they innovate (not penalty based); and share best practices. While the involvement of senior leadership is critical, all innovation must be customer-centeric.
Is the BPO being overshadowed by IT Outsourcing (ITO)? Yes, but ITO is not the end game. This is just a natural migration to lower levels of granularity in how we address the standards and compatibility of smaller pieces of a business. The ideal scenario is to have infinite flexibility in sourcing pieces of everything in an organization, akin to sourcing an entire drivetrain for a car to an offshore partner. Outsourcing of IT services gets more granular by providing a platform for picking which parts of the drivetrain to source. Beyond that come various methods for sourcing every tiny piece of the car to a global network of providers.
Tech firms are in a race to becoming big and bigger. Are they losing out? It's a combination of inertia and unyielding pressure from investors and analysts. When I told one of the world's richest and most accomplished tech entrepreneurs that his company was no longer innovating in a radical way, his response was basically, "We don't need to be innovators. As long as we have cash we can buy innovation." I'm not so sure this paints a bleak picture. I point out in my book SmartSourcing that the real innovations of the industrial age come when we're able to put in place a power utility infrastructure. The parallels to that are significant when we talk about technology. I'd love to see all of the mayhem we today call the IT sector reduced to a utility.
The outsourcing landscape in a few years from now is going to be a rough road for many providers. There will be enormous consolidation and with it an artificial sense of industry innovation as investors try to cash in by building many new small sourcing firms in hopes of an exit will be the greatest economic leveling force in mankind's existence, though it'll take time.
We have just begun to see the impact of globalization. With all due respect and admiration for Tom Friedman, the world is far from flat. Will bind the world together in a way that is difficult to imagine today. And that binding force will be the single great counter balance to what is increasingly an uncertain and unstable political landscape.
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