The value stream for outsourced business and IT services has grown dramatically over the past 20 years. Evolving communications technology has made it possible for enterprises to tap into talent pools across the world, allowing for labor arbitrage and more distributed production risk.
Although traditional outsourcing models still make for great quarterly ROI reports, the advancing pace of technology has thrown up increasingly complex IT challenges - including that of talent availability.
A lack of suitable IT talent is particularly evident in the US, where Gartner predicts about 1 million computer specialist job openings will remain unfilled by 2020. More than ever, enterprises need to leverage global delivery capabilities to keep pace with an accelerating market and local talent shortages.
Traditionally, only enterprises that operated on a global scale could afford or even benefit from a global delivery model (GDM)-based approach, but this is not the case anymore. With the proliferation of low-cost communication networks and tools, smaller organizations now have access to the full spectrum of outsourcing benefits. Business service vendors are not altogether unaware of this trend, with many launching IT, HR, and Finance service bundles aimed at SMEs.
And while most executives will point to Asia as the prime destination for IT outsourcing, truly effective risk management and development efficiency is achieved with multiple teams working a 'global' 24x7 shift.
Why Go Global With Delivery?
Major outsourcing players have long perfected the GDM as a means of delivering more value to their clients.
In the context of IT, the model not only offers value in terms of a 24x7 operation cycle but also other significant advantages.
Bleeding-edge talent availability
With the pace of technology development and adoption accelerating, enterprises often find that they lack the skill sets to efficiently leverage emerging technologies. Cloud security and information architecture design, for example, are rapidly evolving fields where skill obsolescence is a real concern. A globally distributed workforce addresses this issue, by accessing talent pools from multiple geographies, balancing cost and skill proficiency to give you the best value.
Dynamically evolving markets can often challenge development projects, forcing them to pivot and develop new features or integrate with emerging platforms in order to stay competitive. By taking a modular approach to workflow distribution, a global delivery model allows development teams to scale, expand, add, or eliminate teams in a cost-effective manner. This is especially useful if you suddenly need to hire platform and/or technology-specific expertise.
By aligning production environments with low-cost talent pools in different geographies, enterprises can capture tasks from different work sources and assign them to the most competent and cost-effective resource. In this way, GDM enables high-quality product development, while improving overall margins.
A 24-hour development cycle means significant reduction of your turnaround time, which helps you stay ahead of the competition. You can also have more time to analyze and understand new markets.
By splitting your workforce across the globe, enterprises can reduce the risk of operational disruption from political, natural, social, and economic volatility within a single region. Working from multiple geographies also offers the opportunity to seamlessly create multiple master back-ups, mitigating the fallout from any kind of catastrophic data failure.
Transparency and visibility
Successfully building a global workflow requires a high degree of coordination and multi-level project visibility. A beneficial side-effect of this transparency is that project delays, bugs and resource availability are clearly visible to multiple stakeholders, making planning and quality assurance a more dynamic and efficient process.
Working with teams across the world gives your workforce the opportunity to network on a global scale while exposing them to a wide variety of cultures. In an era of increasing globalization and shrinking geographic barriers, this exposure enriches the professional and personal lives of employees at all levels.
The Best Places To Outsource?
The modern enterprise is spoiled for choice when it comes to outsourcing. Apart from the traditional offshore locales like India and China, nearshore destinations have expanded their service offerings in Eastern Europe and Latin America. However, with choice comes the greater complexity of creating an optimal operational footprint.
Depending on project requirements, different regions may offer greater cost-savings or skill competencies.
India, Philippines & APAC
More and more organizations are looking to rebalance themselves and rightsize toward more efficient operational frameworks. Given the breadth of cost-effective, cutting-edge talent in Asia, makes it a natural choice for outsourcing over the next 5 years.
In India, major IT firms are floating new offerings in high-end research & development and product engineering, while optimizing service bundles. At the same time, these firms are leveraging their extensive domain expertise to target sector-specific projects in BFSI, healthcare, manufacturing and telecommunications.
Further east, Malaysia and the Philippines remain leading players in customer support outsourcing and voice processes due to the continued availability of low-cost talent and widespread English proficiency. The Philippines is also a rising star in the customer analytics market and offers increased scalability as previously untapped talent pools become more accessible.
Rising protectionism in the US has pushed many firms to reconsider their outsourced portfolios and bring them closer to home.
Mexico has been engaging these new opportunities with highly developed infrastructure and strong talent pools within thriving cosmopolitan centers like Guadalajara and Monterrey. Reasonable costs coupled with easier coordination and cultural proximity to the United States, continue to make Mexico the prime nearshoring destination for most of North America.
Mexico is closely followed by Brazil, which boasts of a strong educational system and a burgeoning, young workforce. Other potential outsourcing destinations in Latin America include Chile, Costa Rica, and Colombia, all of which are backed by improving infrastructure, talent availability, and alignment with American time zones.
Offering IT services at a fraction of what they cost in more established economies, Poland, Ukraine, Romania, and Bulgaria are rapidly becoming the preferred options for European nearshoring. Poland and Ukraine in particular, have heavily developed IT infrastructure spread across key cities and offer a low-risk, high-output environment for IT development and customer support.
While data security in Europe is robustly governed by the General Data Protection Regulation (GDPR), it’s important to note that some Eastern European countries have immature data regulatory frameworks, making them unsuitable for functions that deal with sensitive business information.
The image below offers a big-picture perspective on the world’s top outsourcing destinations, comparing cost savings vis-a-vis talent and business environment.