Offshoring Remains A Powerful Business Strategy

By Graham Brown, Chief Sales and Marketing Officer, HGS Europe

Offshoring, like many market trends, has its supporters and detractors. Having been in the industry for many years, I have embraced offshoring as an important aspect of any customer strategy, but recent research by KPMG and Horses for Sources (HfS) shows a dip in the intent for companies to use offshoring in the near future. Although the headlines covering this report appear to be referring to a potential collapse in the offshoring model, I believe it’s worth taking a closer look – especially when focusing on the opportunities for customer experience (CX) services. Offshoring is certainly not in decline; it’s just that the drivers for offshoring are changing.

What I noticed when reading the reports was that the research focuses on intent: What are you planning to do in the future? Different sectors and service types all feature different values. In all sectors covered by the HfS/KPMG research, executives plan to offshore more, just not quite as much as a few years ago. So this should not actually be read as a reduction in interest for offshoring. I can identify a number of reasons why this could be the case:

  1. Market Maturity. In many business areas that commonly utilise offshoring, it has been normal practice for more than two decades now. At some point, many companies will find a natural sweet spot, and the enterprise will function with no plans for additional offshoring. This doesn’t mean the companies are rejecting offshoring, just that they have found the right balance for their business, and they are unlikely to keep sending more processes overseas.
  2. Lessons learned. Over the years, service companies have found what does and doesn’t work. Sometimes a process that can be delivered from an offshore location looks great on the business plan, but just doesn’t work as well as expected when deployed. Most of these lessons have been learned by now, but there may still be some companies that are exploring their onshore/offshore mix.
  3. Changing expectations from offshoring. Go back to 2000 and ask an executive why they are offshoring, and their first answer will almost certainly be cost. Offshoring was always seen as a strategy that allowed companies to tap into talent pools at a much lower cost than in their home market. This approach has dramatically changed with companies now using offshoring specifically to create flexibility, access talent, or transform the business - cost is always important, but it is no longer the primary driver of an offshoring decision.

Historically, offshoring detractors based arguments on reducing the ability to touch and feel the operations, losing the physical connection with teams on the ground. This is no longer such a powerful argument due to technological evolution, meaning most of us are now more comfortable operating in a virtual world. Technologies such as VoIP (Voice over Internet Protocol) are making this easy and inexpensive, so it’s culturally easier to integrate a team that is not physically located near to your current team. Your own local team is already coordinating their work with Slack, LinkedIn, and WhatsApp – team members can actually be located anywhere.

It is ideas such as this and the changing expectations from offshoring that are really driving the industry forward. Each time I visit our offshore teams, I am amazed at the results they deliver and their talent and  commitment to excellence. Offshoring in 2019 is all about the desire for companies to access talent and expertise. I personally believe the reputation of service delivery from India is second to none, especially when it involves English language business processes, and I think it is fair to say they wrote the rule book for others to follow.

Today, both India and the Philippines have emerged as global leaders in the provision of offshore CX and BPO services. They both established themselves early into the sector, when customer service was focused mainly on voice contact centres, but now both regions are leading with innovative omnichannel solutions – often based on technologies that are ahead of markets such as the US and Europe. For example, when Facebook wanted to start testing their payment functionality inside the WhatsApp messenger, is it any surprise that Indian customers got the new services first?

If the HfS/KPMG research is accurate, then I don’t believe what it is saying is that we are witnessing a demise in offshoring. I think it is probably more accurate to say that offshoring has reached a level of maturity that will naturally see the rate of growth decline but remain an important and reliable strategy for businesses. This maturity should be viewed as a positive because now there is a focus accessing skills and talent – it is value add, not cost reduction that matters when planning offshoring today.

Get in touch if you have any questions about how offshoring has changed and how I believe offshoring today is a better idea than it ever was. Leave a comment here or get in touch via my LinkedIn.