Outsourcing opportunities during recession

As written by Matthew Deayton, General Manager, Business Development

Outsourcing has become a key business tool for small and large companies across market sectors. But with the current economic downturn, have companies put a stop to outsourcing?
Based on our experience, the answer is a definite no. We are still grabbing business opportunities from the financial and professional services sector.

I recently attended a KPMG conference on outsourcing trend, and the advisory firm confirmed that the recession is opening new opportunities and focus on outsourcing, with companies seeking newer destinations to lower costs and get added benefits.

According to KPMG, the economic downturn’s impact on outsourcing varies by market. But it has emerged that demand for outsourcing from Asia Pacific is on the rise, creating large opportunity for local suppliers to develop their capabilities.

The focus of companies looking to outsource has also changed as economic outlook still looks gloomy. The World Bank expects the world economy to contract by 1.7% and global trade by 6.1% in 2009. While companies previously were willing to invest in outsourcing relationship more than longer term benefits, the recession has put the priorities on cost optimisation and sustainable innovation. In short, outsourcing has risen above just a mere cost cutting tool, to become more strategic to the overall business strategy.

In terms of outsourcing destinations, India is still popular but China is aggressively catching up, and other markets like the Philippines may get a second look.

The KPMG report said in aggregate, the majority of companies in Asia outsource to India at 55%, with China as the second most popular destination at 36%, Singapore at 20%, Hong Kong 16%, and the Philippines 7%.
KPMG said English is the main outsourcing language in India, but with its rapidly rising labour costs, English-speaking companies might give the Philippines, another English-speaking outsourcing destination, a second look.

The conference highlighted some of the key factors that make a location attractive to outsourcing, which included:

• Demographics – a large pool of well educated people available at a highly competitive cost
• Infrastructure – stable environment in which to operate, power, internet connectivity, access to the work place.
• Political Stability – giving confidence to potential clients that the operation is not going to be shut down due to political unrest.

There are other factors like rule of law, protection of intellectual property right, and track record. But the three factors stated above in bullet points were significant barriers for us to attract clients in Indonesia or the Philippines had we entered these markets several years back. Things have changed. Less of the well educated population are no longer attracted to go overseas as more opportunities open locally, the infrastructure has improved significantly, and the political stability is much more evident.

We are positioned in a perfect situation to be a key outsourcer of business processing, and we already have a core of well-experienced team in our specialised field of financial services. As China attracts more outsourcing to this side of Asia, all the region’s countries will benefit. In addition, having representative offices in Hong Kong and Manila positions us well to capture part of the market migrating south.

The Precision Group is a global business process outsourcing company with offices in Hong Kong, Isle of Man, Jakarta, London and Manila. It provides integrated middle and back-office support solutions, as well as creative and web services for the financial and professional services sector.
For more information, please visit our website at www.precision-group.biz