December 21, 2016 3:08 pm | Updated 1 year ago.
In this article, we analyze how the customer preferences relating to offshore outsourcing may change given the technology innovations and also the push to create more manufacturing and technology jobs in America under Trump Administration. In D2E’s opinion that the offshore outsourcing vendors will need to align their strategies to changing customer preferences. The basic premise for this analysis is that more and more customers will adopt cloud-based solutions and the offshore outsourcing will majorly shift to functions like maintenance and enhancements of legacy applications and old versions of products, infrastructure management, business process outsourcing and integration services.
Partnership Options: We base our analysis on the following Partnership Options that have decreasing cost and increasing risk and/or investments from customer’ perspective:
- Co-Managed Outsourcing: In this option, the client has one of their own managers at the offshore outsourcing vendor’ location, who directly participates in the management of the offshore outsourced services. While this option results in lowest risk to the customer (but, higher cost), in D2E’ opinion this option will be least favoured by the clients under the policies of Trump administration.
- Managed Services: In this option, there is no client manager at the offshore vendor’ location and the offshore outsourcing vendor takes full responsibility for delivery of the functions outsourced to it. In D2E’ opinion, this model will be the model that will be most preferred by the offshore outsourcing customers for the functions that need to be outsourced to offshore IT vendors, either due to availability of talent pool with the offshore vendors or due to the type of work which is better done offshore than at client location in the US.
- Reserved Capacity: In this option, the IT offshore outsourcing vendor is asked to set aside a certain number of staff for performing a specific function, irrespective of variation in workload from time to time. In D2E’ opinion, this model will continue to exist, especially for certain business processes that are best performed offshore due to resource availability or cost considerations.
- Build-Operate-Transfer: This model leverages the staff and processes of the offshore outsourcing vendor to establish the offshore outsourcing operation and then transfer the operation back to the client location. In D2E’ opinion, under the policies of the Trump administration, this will be a preferred model for the clients that do need to outsource certain functions either due to availability of talent or the type of work, as the operation can be brought back to America at the appropriate time after training the American workforce in these functions.
- Co-Managed Facility and Captive Operations: In this model, the client owns the facility and the infrastructure at the offshore location and either performs all functions by using its own staff (Captive Operation) or outsources only certain desired functions to the offshore outsourcing IT vendor. This model is being used by clients to do maintenance and enhancements to their legacy applications or by technology companies to support the older versions of their products. Certain functions relating to business trend analysis or innovations in specific areas are outsourced to offshore IT vendors. In D2E’ opinion, this model will continue to exist, as it may be too expensive for the US companies to move these functions back to America, and also because the American workers may not be too interested in learning and providing maintenance and enhancement support to these core legacy applications or older versions of products. Offshore outsourcing will continue to grow.