Outsourcing – Going With The Flow

Outsourcing is a subject that gets all kinds of reactions, some positive and some negative. This is true whether outsourcing is done at the local level perhaps using another company in the same city or at the international level with another company at the other end of the world. In an interesting article yesterday in the Montreal Gazette, “The Indian Advantage”, Peter Diekmeyer describes how CGI is offering outsourcing services in India. CGI is headquartered in Montreal, although it has had an Indian division since the early 1990’s. There is very little discussion on the mixed reactions to outsourcing. The closest is in discussing CGI’s challenge in selling the advantages while properly explaining the social and public policy implications of outsourcing.

Outsourcing will be a major trend in the next few years. Innovation Canada has a good deal of information on it. In particular there is an Outsourcing FAQ website that has much to offer. The main lesson seems to be that if outsourcing is merely a way of cutting costs, then it may be less than successful. Even Alan Pelz-Sharpe, Principal Strategist & ECM Consulting Practice Lead for Wipro Infotech, one of the leading Indian suppliers of outsourcing services, points this out. He particularly recommends a video on Google entitled “Is Outsourcing Profitable?” by Paul A. Strassmann. If seen only as a cost-reduction exercise, then outsourcing may be perilous. This is true not only for the users of the service but also for the providers of such services. Just look at Canadian call-centres for an illustration of that.

What seem to be missing are the strategic implications of outsourcing in an Internet age. In some ways it’s akin to the limited view that Jack Welch, ex CEO of GE, had in 2002. He saw the Internet as a communication vehicle allowing greater integration between suppliers and customers. Others at that time saw the Internet as an additional promotional channel to get the message through to customers. We are now seeing that the Internet has much more to offer.

The Internet has particular significance in thinking about outsourcing. The Internet is international and it supports massive information movement around the globe. Managing and operating companies is only possible through information movement. Originally the notion of outsourcing was to hive off non-core activities to cheaper and more efficient service providers while retaining the core activities within the company. When it comes to information transfer, which is at the very heart of a company’s activities, the implications of outsourcing are much more profound. As Peter Diekmeyer points out, India has an English-speaking technically trained workforce and an exploding population that will be the world’s largest by mid-century.

It’s not surprising that companies such as Wipro Infotech, Tata Consulting, Infosys and our own CGI are investing heavily in their ability to provide Indian outsourcing services. Using such services will be an important strategic decision for many companies that want to stay ahead of the competition.

Tags: outsourcing, Montreal, India