A paper released by Equa Terra called “Outsourcing Trends in the Automotive, Manufacturing, and High Tech Industries” said that global competition is pushing the companies within these industries to adopt this mode of managing their businesses. Both BPO and ITO services have become their new demands. Says Stan Lepeak, Managing Director, Research, EquaTerra, “Extreme levels of product innovation and operational efficiencies are prerequisites for North American firms to remain competitive in these industries against lower-cost emerging market rivals. Pressure has long been on production and blue-collar labor to become more competitive. Now that same pressure is on white-collar labor in back-office operations.”
In fact, 67 percent of companies surveyed in identified cost reductions as the key means of measuring outsourcing success. Levels of customer satisfaction were seen as important by 46 percent of respondents. Meanwhile, 31 percent said that improved process performance level was cited as the third most important reason for outsourcing.
The Equa Terra study shows back-office BPO will become more prevalent, with the emphasis shifting to extending outsourcing usage to more remote, global resources. “For some companies, outsourcing to lower-cost markets such as India or China can help them enter those markets to sell their own goods and services. Smaller markets such as Central and Eastern Europe, however, will most likely remain primarily a source of services,” the study said.
Explains Lepeak, “ As outsourcing becomes more pervasive and encompasses more back-office support as well as critical functional areas, outsourcing service providers will more closely resemble a critical member of a manufacturer’s supply chain rather than a traditional third-party support organization.” This increasing demand was highlighted by the fact that when deciding on the outsourcing investments, 32 percent of manufacturing and related organizations were planning to outsource new process areas, 38 percent wanted to go to newer geographies to find outsourcing partners, and 29 percent planned to expand existing outsourced process areas.
Some of the processes that are most likely to be outsourced include warranty services, service after sale, document service, and R&D and analytics. On the outsourcing service provider landscape, EquaTerra notes that large multi-national service providers are bundling their ITO and BPO offerings, and also extending services into others, such as R&D, logistics services, document services, warranty, and service after sales.
Explaining the service provider trend, Lepeak adds, “Buyers will see a broader array of service provider options, but the number of service providers able to deliver large multi-function deals across multiple geographies will still be limited.” Moreover the paper suggests to the three industries to evolve their outsourcing and governance strategies and choose partners accordingly to manage new and existing processes.
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