'Outsourcing' word losing its charm?

Has the name 'outsourcing' lost its charm? We all saw how the word got battered and bruised in the recent US elections, not for the first time though. The elections are over now but the 'negative vibes' can still be felt. Whatever be the reason-the political impact or the industry's own urge to rebrand or reinvent itself, it seems that the word 'outsourcing' is not wanted any more.

Industry people are voicing out their dislikes in using the word 'outsourcing'. They feel it is not sending the right message across and hence does not make much sense anymore. What is needed is a name that reflects the true state of the industry, and quite importantly sounds more "positive".

Outsourcing advisory firm, Horses for sources also came up with an interesting survey some time back that asked for opinions of 871 enterprise buyers, service providers and advisors in the outsourcing industry. The results were interesting but quite predictable as well. While the buyer community does not have much to say in this and were mostly indifferent to the need for a name change, the service provider community was clearly all for a new and better name, as they do not want to be known as 'outsourcing vendors' and believe that it does not reflect the true picture of the industry.

This is what we too figured in our interactions with numerous service providers. "We would not presume to rename an entire industry. However, we generally do not refer to ourselves as an outsourcing vendor", says Nick Puntikov, President, First Line Software. The company would rather prefer to be known as a software engineering services provider and technology partner to its clients. This is what most other services companies feel to.

Industry experts too support the view, that the word 'outsourcing' does not make sense any more. It may mean different things to different communities. Only people that are close to this industry and are involved in it can look beyond the name. When Cliff Justice, Partner and US Leader, KPMG was asked by HFS about his views, he mentioned quite candidly that the word outsourcing has been abused and politicized and the industry needs to find a better alternative.

While a new name could be a good change for the industry, especially when almost every thing in the industry is seeing transformation. Traditional outsourcing models are being replaced by new models that focus more on optimized results, disruptive cloud based technologies are finding their way into contracts and buyer-vendor relationships are changing as well. But the argument here is that only a 'name' change is not going to make or break anything.

The change has to be reflected in more than one way. There has to be a fundamental shift in the industry that has over the years been so cost-centric. Buyer vendor relationships, pricing and sourcing models, all things have to move beyond to focus more on 'value creation'. Unless that happens, a new name is not going to change much. The focus should be on the quality of services and what value does it bring to the organizations. "Just re-branding without enhancing capability, business value creation, innovation is likely to bring the industry not even an inch ahead", says, Krishna Baidya, industry manager, Asia Pacific, Frost and Sullivan.

The need is to move away from the labor arbitrage model and put more emphasis on areas like improved outcomes, value creation, innovation and so on. Once the industry reach there, figuring out a better alternative would not be tough any more.

 

Challenges to Overcome

HFS points out that there are four challenges that the industry has to overcome before this happens:

Challenge 1:How can we overcome this singular focus on cost that strips the industry of its value?Challenge 2: How can we leverage outsourcing as one of a variety of vehicles to achieve business objectives?Challenge 3:How can many of the service providers invest smarter in their account management teams?Challenge 4:How can buyers and providers really partner to foster innovations into business process outcomes?

 

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