| Key Points from the Panel
Michael Bieler – CSC (Supplier Representative)
§ Some sectors and industries are affected more than others in an economic downturn, so we should not expect to see a uniform impact across all types of businesses. § A downturn in economic activity will lead to the increased use of outsourcing. § Outsourcing activity should increase as executive drive the message to lower costs and improve operations to the organization, and the organizations in turn engage outsourcers for additional activities. § More outsourcing deals are becoming output/results-based, as opposed to input or wage arbitrage-based. A good measurement of value-add is key. § An economic downturn is causing some interesting industry restructuring – who would have thought that Blockbuster would make a bid for Circuit City? § Industry knowledge, domain expertise and innovation will become increasingly important for outsourcing suppliers to bring to the table. § As India-based companies target the U.S. market, things will get interesting for the traditional established players. § Customers are increasingly asking for transformation solutions, not lift-and-shift, or your-mess-for-less. § Advances in technology are speeding up transition times (e.g. getting servers up and running used to take day, but can now be done in 30 minutes). § Mexico is likely to become a more attractive delivery location for both onshore or offshore suppliers because of similar time zones and language capabilities for the fastest growing segment of the U.S. population. § There is a growing movement by many suppliers to set up or bring back contact centers to the U.S. in lower cost of living areas.
Joe Sifferman – Pepsico (Customer Representative)
§ Unfortunately,by strict economic definition,we usually find out that we’re in a recession only either after the fact or when it’s nearly over. § Due to current perceptions, companies arealready factoring in the possibility of a recession into their planning/budgeting processes. § At the same time, inflation is also a real concern – the price of fuel and raw materials is rising rapidly. Demand for corn is rising, for example, because of an increase in the use of bio-fuels and overall worldwide demand. § Organizations will have to get more creative at leveraging partners to gain efficiency, i.e. cost savings in operations. § Due to increasing demand for building materials, food, and energy, we should expect to see China play an increasing role on the world economy in the years and decades ahead. § High-end and lower-end market oriented companies may benefit more from a recession than companies targeting the middle-class markets. § The green movement will likely influence the nature of outsourcing activities. § Capital intensive industries, along with travel, transport, and construction industries would seem to be the most likely impacted from an economic downturn. Energy companies are likely to continue to benefit. § Customers would likely view the consolidation of outsourcing suppliers favorably because fewer suppliers may simplify governance. § Customers are demanding that suppliers bring innovative solutions to the table. Innovation used to be viewed more as something nice to have.
Gary Claytor – BDP Partners (Advisor Representative)
§ How the government and innovative thinkers in industry react (or over-react) will determine how deep or how long the recession turns out to be. § Recessions have in the past caused an increase in outsourcing activity. Companies use outsourcing both to save money and improve quality. § The weakness of the U.S. dollar has the potential impact the marketplace. § People will respond creatively to an economic downturn and likely develop creative solutions to cope. § A lot of outsourcing deals are coming up the 2nd time around, and there is less focus on cost savings and more emphasis on innovation. § Outsourcing suppliers have been and will continue to consolidate through an economic downturn. There is also increasing interest from offshore organizations to purchase stable small-medium outsourcing companies in the U.S. § Many mid-cap companies rely on outsourcers because suppliers can more easily keep up with advances in technology and provide capital for new technology. § Outsourcing suppliers will continue to pursue work-at-home models for service delivery as a way to deal with wage constraints, higher commuting costs, as well as staff absenteeism.
Chairman’s Summary – January 15, 2008
The meeting was held at the University of Texas at Dallas School of Management. This meeting marked the first anniversary of the DFW area chapter. Many thanks to the UTD School of Management for hosting the event!
The theme of this quarter’s meeting was Outsourcing Strategy. Jag Dalal, Managing Director for Thought Leadership at IAOP was the keynote speaker. Jag provided his thoughts about why service providers will have to take on more risk and essentially become risk mitigators for clients. The challenge service providers have often faced is their tendency to be focused on the present or the past, while C-level executives are always looking forward. Similarly, cost savings is a transitory advantage that only lasts for a single fiscal year. In order to win the long-term confidence of buyers, service providers will have to go beyond faster, better, cheaper. They will have to provide service offerings that decrease risk and provide sustainable change to organizations.
The second speaker was Usman Ghani, who not only teaches at UTD, but is also a management consultant, Executive Trainer, Author and Chairman of ConfluentC. Usman discussed the current role of strategy in corporate America and what part outsourcing plays. He talked about where outsourcing is positioned today and how it will change in the future. He also discussed what organizational challenges outsourcing suppliers face and what opportunities exist for them. The presentation provided an overview of the current and future state of outsourcing in the context of organizational strategy.
The customary networking reception followed the meeting. Chapter Chair, Tom Tunstall, thanked the 45 attendees for their participation at the first anniversary meeting.
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