The competitive advantage offered by outsourcing, relative risks of global sourcing, and differences between process improvement and innovation were among the topics debated by panelists in the G6 Under Practitioner Review at the North American Shared Services & Outsourcing Week conference held last week in Orlando, FL. Discussion on all three issues demonstrated the variance of industry opinions about how these issues are affecting the delivery of outsourcing services, as well as differing thoughts on the relative merits and shortcomings of the captive team and outsourcing models.
The G6 panel consisted of Capgemini CEO Hubert Giraud, CSC President of Global Sales and Marketing Peter Allen, Alsbridge CEO Ben Trowbridge, Deloitte Principal Susan Hogan, Genpact President/CEO Tiger Tyagarajan, and KPMG Principal of Advisory Services Bob Cecil.
Cost as the Basis of Competitive Advantage
When presented with the statement “Outsourcing providers sell one competitive advantage: cost,” panelists agreed that cost forms the basis of the competitive advantage offered by outsourcing, but is not enough in and of itself to support the BPO industry.
“When I was a (captive services provider) for the first seven years of my career, that was our statement,” said Tyagarajan. “We said we aligned culture and business objectives. But cost is a starting point with other advantages layered on top. In today’s world, it must be there.”
Trowbridge said that shared services providers must offer their client benefits other than cost. “You must provide points of value based on the needs of shared services organizations,” he said. “(Shared services organizations) need to ramp quickly and quickly transition their assets and resources to a global shared services footprint. You can’t do that on your own. Cost is not the answer to all situations.”
Global Risks Require Management
Panelists also generally agreed that global BPO, shared services and captive team sourcing carries significant risks which must be properly managed. In response to the statement “A shrinking pipeline, new low-cost locations, data security, and economic/political uncertainty make global outsourcing risky,” Trowbridge said there is a “tremendous” risk associated with global sourcing.
“The reason a location is low-cost has a variety of drivers: dramatic differences in GDP, crime and communications,” said Trowbridge. “It’s easy to make a ‘me too’ decision based on where the nearest expat school is to the shared services delivery location, but you can wind up with a risky location. The labor pool can shrink, a new competitor can move in.”
However, Trowbridge said a properly set up captive shared services center can have its location based on a “pure” assessment of local risk. “With a captive center, you can tour the world with a blank slate,” he said.
Giraud spoke in favor of a widespread outsourcing footprint.“The world is changing at a pace nobody can predict,” said Giraud. “All barometers are continually moving. The capability of a big organization with a global strategy is a competitive advantage. Outsourcing spread across the world is less risky than a captive center.”