jump to navigation

In uncertain times, what companies want is certainty April 26, 2012

Posted by Mark Hillary in Current Affairs, Outsourcing.
Tags: , , , , , , , , , , , , ,
trackback

According to the Office for National Statistics (ONS), the UK is now officially in recession as the economy has contracted for the past two quarters. It is interesting to observe that many leading economists don’t believe the ONS data is correct, but these are the official numbers so we have to deal with what they present to the country.

Back when the present economic slowdown really began in 2007/08, many technology analysts predicted that a slowdown – or full recession – would be a good thing for the industry. If companies wanted to reduce outgoings they would look increasingly to offshore outsourcing as a way to achieve this.

But it never happened, and looking back it was quite obvious really. Any IT outsourcing programme has a lot of expense up front. Transition cost, training cost, consulting cost, auditing cost… there is a lot to budget for meaning that you have to commission a large piece of work, make sure it runs to plan and only once you get to the future business state can you hope to start making savings.

This meant that offshore outsourcing declined during the initial slowdown. It recovered and the market is growing again, but take a look around Europe right now. The UK is now in recession, Spain is about to go back into recession, the Euro currency lurches from one crisis to the next with the continuing reality that not all countries using the Euro now will be doing so at the end of this year.

The Dutch Prime Minister just resigned because his people refuse to adopt an austerity plan and the French are veering towards a new socialist president for similar reasons.

The level of political and economic uncertainty is so great that it would be foolish for any service supplier to still be selling the ‘reduce cost’ model of business. Now if they can start selling outsourcing based on a ‘we can tell you your costs for the next 5 years’ type model then in this present climate I expect there will be a lot more takers.

The last economic slowdown showed how unattractive the simplistic model of slash and burn offshoring really is. If we are heading into deeper economic uncertainty, that approach should not make a comeback.

Recession

Photo by Anders Vindegg licensed under Creative Commons

Advertisements

Comments»

No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: