outsourcing work is No Longer In

outsourcing work has fallen on hard times, just like almost every other sector of the global economy. However, that's because so many companies must take drastic cost-cutting measures, not because outsourcing work has lost its attractiveness as a tool. There's likely to be a great deal of pent-up demand when the economy improves, said Kevin Keith, director of business development at the Robinson Group.

In the past, companies with tight budgets frequently turned to outsourcing work during tough financial times. The current global recession, however, has curtailed the outsourcing of jobs as much as it has other parts of the economy.

"Oddly enough, the global recession has hurt outsourcing significantly," said Chad Hahn, principal owner of Hahn Consulting and CEO of Square One Solutions.

"In an environment where there is tremendous pressure to cut costs amid falling revenue, you would think that companies would try to outsource more to keep costs in check. The reality is that companies have cut outsourcing along with all the other expenses in their business," Hahn told CRM Buyer.

"The recession means a lot of people are out of work," Kevin Keith, director of business development for the Robinson Group, told CRM Buyer. All business is down, including outsourcing, and rates have dropped as well. The economic crisis hit banks and financial companies especially hard, said Keith.

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For years, Keith struggled to find qualified people to fill roles. Now, however, the challege is finding work for good candidates. Even recruiters are out of jobs today because no one is hiring, he pointed out.

The slowdown has affected the entire outsourcing work process. Even when companies decide to hire, they do so very cautiously.

"The deal cycle has gotten longer," Gary M. Zeiss, an attorney who specializes in the legal aspects of outsourcing work, told CRM Buyer. "The deal cycles are extraordinarily slow. People are trying to renegotiate deals."

Pressure to reduce costs, insecurity and instability in the market are to blame, according to Zeiss.

Instead of trying to grow, companies are trying to shrink, he said, pointing to cuts in manufacturing, the legal industry and IT.

Signs of Life

Some industries are showing signs of life, said Robinson Group's Keith. Pharmaceutical and insurance companies remain viable and active.

There's higher activity in the travel industry and in the call center industry, noted Zeiss. Customer service is still being outsourced because it is a cost. Companies with "large customer service footprints," like the travel industry, are more likely to outsource, he explained.

Hot Spots

Asian countries continue to be the hot spots for offshore outsourcing. Mexico remains popular for near shore outsourcing.

"I still think India is one of the prime locations for outsourcing," said consultant Hahn. Even after the Satyam debacle, India is still more attractive than other countries because of its large pool of English-speaking resources and relatively good relations with the U.S."

India, China and the Phillipines are all outsourcing work hot spots, commented Keith.

"Russia and the Ukraine territories are coming on strong now also," he added.

Entrepreneur Lee Blaylock founded WhoDoYouKnowAt, which offers a private business networking platform, in 2008. He outsourced development of the application logic extensively to India.

For people-intensive businesses, outsourcing work makes sense whenever there's a cost advantage, Blaylock told CRM Buyer.

"The economy has made me smarter about how I sourced my labor," he said.

outsourcing work comes in a variety of forms, and Blaylock became familiar with many of them, including dual shore, near shore, and rural shore.

India and Russia are the big IT outsourcing hot spots -- even more so than China. That's a consequence of cultural differences, he noted.

Rural-shoring spots include West Virginia, Idaho and Alabama, said Blaylock. Often, rural-shoring companies position themselves near solid engineering colleges for ready access to the labor pool produced by the schools.

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