Outsourcing at Disney & SCE – Lessons & Opportunities

December 14, 2016 7:39 pm | Updated 1 year ago.

A lot of attention including legal action, has been focused over the last 2 years around the offshore outsourcing engagements at Walt Disney World Resort and Southern California Edison Co, where a number of employees were not only laid off as part of management’ decision to offshore outsourcing of the IT functions to offshore vendors, a number of affected workers also complained that they were asked to train less experienced offshore outsourcing based staff from India in exchange for their severance package. This was not only debated extensively during the US Presidential election, US President-elect Trump in one of his most recent speeches has also said that one of his first executive orders after assuming office would be to ask the Department of Labor to investigate all visa abuses that undermine jobs and wages for American workers.

 Investigation on Visa Abuses related to Offshore Outsourcing – a boon or a bane

In D2E’ opinion, this can be a boon in disguise for the offshore outsourcing IT services companies, making them focus more on innovations in products and solutions, rather than simply offering cost reduction in large offshore outsourcing deals through labor arbitrage. Compared to the size of the IT/ITES industry in India, China, and other Asian countries, the number of world class products produced by the IT/ITES companies in these countries are few and clearly there is an opportunity for these companies to make investments in developing products that can reduce the size of offshore outsourcing engagements significantly in terms of headcount and thereby avoiding the potential issues relating to visas etc., that seem to be a very sensitive topic in the USA right now and may continue to be so for the next few years.

Granted that the investments required for developing a world class product that sets itself apart from its competitors is substantial and also the investments in sales and marketing effort to promote the products to create awareness, especially in a market as competitive as the US, is by no means small and the revenue model is at best lumpy, but once successful, it can far outweigh the benefits of a head count based linear revenue model. Also, from customer’ perspective, the employees get an opportunity to not only learn a world class product to improve their productivity, but also can use it to bring competitive advantage to their business which will only get them more motivated and they will appreciate the effort of the management, rather than criticise them as in the case of Disney or SCE.

As the IT/ITES industry moves towards innovative products and solution rather than head count replacements; the customers need to be aware that the need for deployment of staff from the offshore outsourcing vendors will still exist, though in numbers that are far less compared to a pure headcount replacement model. In the new scenario, the offshore outsourcing vendors will need to deploy highly skilled business analysts, who not only understand the features of the new product/solution being deployed, but also have a deep understanding of the underlying technologies like AI, Analytics, Machine Learning etc., to ensure that the product deployment delivers the business benefits that it is meant to deliver.

 D2e’s Opinion on the recent trends in offshore outsourcing in the USA

In D2E’ opinion, this is a win-win scenario for both the customers in the US and the offshore outsourcing IT vendors, as these highly skilled business analysts will clearly meet the skills and wage requirements of the H1-B program and the customers in the US will also get the business benefits that they want.

All the specialty partners of D2E’ Aggregator platform – GAVS Tech (Infrastructure Management), Polaris (Banking Industry), Sonata (Retail Industry and Enterprise Mobility), TCG Digital (Analytics, Aviation Industry) etc.– are aligned to this win-win scenario going forward.