The business world is being disrupted by the combined effects of growing emerging economies, shifts in global demographics, ubiquity of technology and accountability regulation. Infosys believes that to compete in the flat world, businesses must shift their operational priorities.

« Celebrating 10 years of CIO Independence | Main | Five Disparate Global Sourcing Objectives: A Conundrum? »

The GSS principle: It is Global Sourcing, Stupid!

Words are like people - some lose their distinctive flavor over time and some start to get confusing. And some start sounding the same as another: just like a popular theory that several years after marriage, a couple starts looking and talking very similar to each other!

The words i am referring to in this post are 'Outsourcing' and 'Offshoring'! They had distinct identities several years ago, when the world was still a little round. They reflected the Cold War mindset - there was a First World (US and other western developed countries), a Second World (USSR and its communist allies), and a Third World (underdeveloped countries in the eyes of the beholder). Outsourcing was associated with getting work done by a vendor who belonged to the First World; Offshoring was linked to sending some bits and bytes to an emerging Third World country (usually India) that would do it, like, ten times cheaper. The Second World was communist, so they never figured in the equation.

This was the world in which the IBMs and the EDSs of the world prospered, and in which some of the top C-level decision makers in F1000 companies grew up in. And it shaped their thinking and worldview.

Suddenly the World became Flat. It didn't happen overnight, of course, and Thomas Friedman just happened to write about it sooner than others could, but the boundaries started disappearing ever since the Berlin Wall fell, and one day it was like ....poof! Flat as far as the technology eye and the services eye could see...

Words which made sense then, no longer do so now. But some people still hold on to those without realizing that those labels do not fit what they are trying to describe and ask for in the current context.

I met a top level decision maker at a leading telco in the US two weeks ago and there it was,

'...we are going to consolidate our outsourcing services providers', and 'we consider you more as an Offshore services provider'

And in a quarterly presentation from a leading sourcing deal advisory firm...'the offshore market is growing ..., but the outsourcing market and players are...etc.'

One of the first influential organizations to get this nuance was Gartner - three years ago, they stopped having two separate events around Outsourcing and Offshoring, and instead rolled them into one per year, called Gartner Global Sourcing Summit. The nuance they got was simple - it is no longer about 'Outsourcing' and 'Offshoring'; it is all about Global Sourcing. If Bill Clinton were to describe it, he would say, 'It is Global Sourcing, stupid!'

Why is it so? Well, firstly the traditional outsourcing model (your mess for less) and the traditional offshore model (your work for less) are both being replaced by the Global Sourcing model that places an emphasis on doing the work where it makes most sense, sourcing resources from where they are the cheapest and of the best quality, and delivering where there is the best client interface. So, even the erstwhile 'First World' outsourcing companies are being forced to do service delivery from globally distributed locations - IBM and Accenture have added more people in India in the last 2-3 years than anywhere else in the world combined. And companies like Infosys have shown strong propensity to bid for and win large outsourcing deals that they were traditionally not even invited to.

Secondly, technology has made it possible to move most of the services work to global locations and manage/deliver them from remote centers. Technology has also digitized the scope of services so they can be easily disaggregated and then re-aggregated.

Thirdly, offshoring became mainstream and came of age. Thanks to the Y2K crisis and the dot com boom - the quality aspects of the so called Third World service providers came across very strongly. Sourcing to offshore locations and taking advantage of the talent available at a cost basis that was several times lower became a topic of discussion in the corporate boardrooms.

They key shift now is that one of basic aspects that goes with Outsourcing - stepping up to take ownership of deliverables, portfolios and service levels in a fixed price model- is being provided by leading global service providers like Infosys as well. And they are going futher by incorporating transformational solutions as part of a Sourcing relationship, so that the client continues to derive value even into the future.

Going offshore doesn't just mean sending projects or discrete tasks. There are just two kinds of service providers now - those that can take on ownership and deliver work from anywhere in the world and those that cann't.

And I fail to understand why someone would want to limit their sourcing strategy to the traditional models and providers or outsource to a service provider which cannot or does not practice a Global Delivery Model.

Next time you meet a client or give an internal pitch to your colleagues, look them right in the eyes and tell them the truth: Outsourcing and Offshoring are passe terms, they are actually sub-sets of what we should be discussing and talking about, which is Strategic Global Sourcing.

Tell them the GSS Principle: It is Global Sourcing, Stupid!

Comments

Thank you for the information. It's interesting.

An interesting post.A thin line surely exists between offshoring and outsourcing if it is compared taking the countries into account.Counting on benefits,outsourcing outperforms offshoring keeping in mind the reduction in cost benefits of offshoring.

I agree with the blog; it's no longer about onshore/offshore geography....but for many it is still about control, or shall we say the discomfort of relinquishing control, particularly in diverse, far flung locations. That's why you have to work with a trusted strategic partner and seal the deal with a watertight SLA and other protections...

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Infosys on Twitter