Outsourcing 2010: Green growth, public sector deals and rise of the SME
Divergent trends mean an exciting year for the sourcing industry
What to expect from all types of sourcing this year? The National Outsourcing Association's (NOA) Martyn Hart offers his predictions.
It's that time of year again - time to look forward at what 2010 has in store for the outsourcing industry with the NOA's annual predictions.
More public sector deals
Top of the pops, predictably perhaps, is the public sector's impending and colossal challenge - to cut costs left, right and centre and help claw back the government's huge budget deficit. The NOA membership base and board, predicts a big rise in public sector sourcing arrangements. The sector's ability to cut costs by traditional means, such as staff cuts, is limited, so sourcing and shared service arrangements will come as a matter of course. This prediction is starting to come true right from the word go, as Lancashire County Council has just announced a new £1.9bn shared service project. We expect many more deals like this to come.
Green growth
Next up is the growth of green technologies and 'green sourcing' arrangements. Though global leaders failed to reach a consensus at the recent Copenhagen summit, there are some promising noises coming from the business world that give cause for hope. There are scarce few outsourcing contracts that go through nowadays without taking into account some measure of supplier 'greenness'. But this year will see green embedded further and deeper into sourcing than ever before. The NOA predicts a more concerted move to understand what 'greenness' actually means in sourcing, and has also launched its Green Steering Committee, to help guide the industry.
Green innovation
Likewise, 2010 will also see more innovation in green services and products that impact an organisation's green credentials. Legislation such as the Carbon Reduction Commitment (CRC), though it has some interesting side-effects on sourcing, provides new business process outsourcing (BPO) opportunities. Advisory FirstCarbon, a subset of ADEC launched last year, is an early mover in this space. The company has seen the opportunity to use its BPO processing capacity to carry out 'carbon accounting'. As companies race to work out, and reduce, their overall carbon footprint, such services look set to become increasingly popular.
Economic recovery
Most signs point to economic recovery for the UK early this year. This of course depends on a personal level of optimism versus pessimism and whether you believe the naysayers or not. Personally I'm prepared to go with the popular opinion of recovery, especially as it means good things for outsourcing. Vendors should be especially happy as their clients stop asking for reductions and look towards expansion of capacity to support renewed growth.
Lots of big contracts
The sourcing advisory firm TPI supports the idea of outsourcing growth. It expects to see a rise in the number of large scale contracts awarded both globally and in Europe in the next six to nine months. This, it says, is due to the clearing of a blockage in contracts that has built up since 2008 as decision makers refrained from actually making decisions. Well, this year looks set to see them deciding with a vengeance again. Hopefully, a bit more money flowing through the system will also help boost new innovation.
SMEs step in
There are some very interesting predictions coming from South Asia. Not least is some recent research from Slasscom, the Sri Lankan equivalent of Nasscom, the IT and outsourcing industry trade body in India. Slasscom found that many UK SMEs plan to offshore this year. According to their report, almost one quarter of companies are considering it, while one in 10 say they are very likely to dive in. This is interesting considering SMEs' erstwhile reticence towards the discipline and spells good things for those smaller offshore locations such a Mauritius, Sri Lanka itself and up-and-coming African nations.
Location, location, location
Other location-based predictions proffer China as an new, upcoming call centre player; the Philippines and Russia to increase in prominence on the world stage; and Brazil to take a bigger role in global IT outsourcing despite increased competition from Chile. 2010 should also see more location specialisation, for instance focusing on finance or elements of IT delivery, as countries recognise that global outsourcing cannot grow interminably.
Tale of two trends
Overall it looks like 2010 will be a game of two halves for outsourcing. On one hand we see optimism rising in the private sector with companies using outsourcing to seize growth opportunities and re-skill with minimal risk. But on the other we see what amounts to a public sector recession wreaking havoc on those people and organisations in charge of public service delivery. Either way, outsourcing and offshoring can, and will, be used positively in both respects, so you can expect sizeable sector growth across the board.
Martyn Hart is chairman of the National Outsourcing Association.