Drivers of North American Domestic Outsourcing | Market Insights™
May 31, 2015
Drivers of North American domestic outsourcing
Drivers of North American domestic outsourcing
50% increase in North American domestic delivery center set-ups by service providers in recent years, and that growth is expected to continue
There’s a lot of rethinking going on in North American businesses in light of new technologies. In Everest Group’s conversations with clients and in round table discussions we’ve been holding in the industry, we find that these mature companies believe automation gives them the ability to bring their work back on shore.
After more than a decade of achieving value through the offshore labor arbitrage model, one would think that mature organizations that have built GICs or captives, or organizations with extensive use of third-party outsourcing providers, would be at peace with the model. We expected them to move to a model of arbitrage plus automation. But the level of peace and comfort with offshore arbitrage is much less than we expected, and companies are expressing their desire to use robotics automation to repatriate their work.
This is particularly the case in regulated industries with significant compliance requirements. This is where the desire to move work back on shore shows up first. The increasingly regulated financial services industry is especially burdened with complex regulations. These businesses receive a higher degree of scrutiny if operations are in offshore low-cost locations than if they are automated. It’s easier to demonstrate compliance in an automated environment than in an arbitrage labor environment.
Moreover, these companies believe life is easier in an onshore environment than in an offshore environment.
This is not to say the desire to move work back on shore is a sea change. But we are seeing the early stages of this movement.
I think this is a very interesting development. Our hitherto assumption that the market had overcome its xenophobic fears is not correct. It’s quite possible that the steady blast of negative press in the media and the nationalistic pressure from consumers may be starting to play a role in this re-examination.
Photo credit: Flickr
Three stoplights. Well, eventually four by the time I moved away in 1985. Also, a line of people each night around the new McDonalds for several days after it opened in the late 1970s. This was the situation in my hometown of Maryville, Missouri with a population of just less than 10,000 people at the time.
Small, rural town, right? Yes, it was in many ways. But it was also home to a university, Northwest Missouri State University, which was the first college in the U.S. to put PCs into every dorm room and a student population of about 5,000. The area was packed with PhDs and farmers quietly living the pleasant life in the middle of the country.
As the buzz about rural and domestic outsourcing has increased over the past five years, I have often wondered “Is this type of location a good candidate for a service delivery center?” To the best of my knowledge, it does not have a service delivery center of any notable scale.
To help answer questions like these, Everest Group is the research partner for RevAmerica, to be held in New Orleans on May 5-7, 2015. This is the only event focused on domestic sourcing in the U.S. and Canada.
The research report that we release at the event will analyze the trends in domestic outsourcing, looking at variations by location type across different functions (IT, business process, contact center), type of service provider, and other factors.
Although we are currently deep in the middle of collecting responses to RFIs and conducting interviews, we have been able to glean a few initial insights from the database of approximately 350 cities, which range from small, rural communities to tier 1 cities. Some of these insights include:
We invite you to join us in New Orleans as we roll out the findings of this important study. We look forward to hearing your experiences.
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