Companies to simplify outsourcing during downturn

Sourcing-advisory firm EquaTerra says the downturn will see businesses simplify outsourcing and offshoring deals to generate faster returns on investment and reduce risk

The economic downturn will force businesses to simplify their outsourcing and offshoring agreements to generate faster returns on investment and reduce risk, even if that means glossing over problems in deals and fixing them later.

Speaking to ZDNet UK sister site, the managing director of global research for sourcing-advisory firm EquaTerra, Stan Lepeak, said: "In general, firms will outsource more; they'll become more narrowly focused on their goals."

Lepeak said the primary drivers for companies, when negotiating outsourcing and offshoring agreements during the downturn, will be to cut costs as quickly as possible.

As a result, objectives such as process improvement, innovation and transformation will become less of a priority.

"Outsourcing as a tool is probably more important than ever right now, but you want to use that tool in a way that it's very clear how you're going to apply it, what you want to get from it and when. This probably isn't the time to be overly ambitious," Lepeak said.

He said businesses will also try to negotiate agreements more quickly, or "speedsource".

"You don't necessarily want to cut corners and be too hasty, but you need to recognise that, in difficult times, you might need to accelerate the process and identify some things that you may have to go back and fix later," he continued.

It's a process that would be helped by consolidating outsourcing and offshoring providers and staying with those known to be safe choices, rather than pursuing agreements with new suppliers, Lepeak noted.

He added that larger, more established offshoring regions, such as India, should benefit for the same reasons, while newer destinations, such as Vietnam, could be seen as more risky, despite being cheaper.