What is outsourcing beyond Covid-19
The Covid-19 pandemic has altered the business landscape globally. The impact on business will be massive and long-lasting. Covid-19 is not only a health crisis of immense proportions, it is also an imminent restructuring of the world economic order . We have already seen the impact, globally, of this disease, and we are only in the early stages. We are in a “rescue” mode at the moment and therefore are only just beginning to understand the long-term impact on businesses, the professions, and the workforce. Most leaders are struggling to manage the impact on their business and haven’t had time to think about the long-term changes they need to make in strategy and direction.
The outsourcing, outsourcing or subcontracting of processes and production units has been directly affected by the epidemic. Regulations with work-from-home recommendations, the total or partial suspension of activity in companies, as well as closures and limitations on the trafficking of people and goods in some countries, have interrupted normal outsourcing operations worldwide.
It would be helpful to look back, but we are not even at the stage where we can do it and learn from the past. We must try to predict the impact on business decisions for both customers and suppliers, while trying to adapt to a new normal.
In a sense, this epidemic can be compared to the “threat” of the year 2000, except that it did not cause serious disruption to companies. But it was the “threat of disruption” due to the year 2000 that led companies to consider outsourcing as a strategy to protect their investment. It also led to the era of offshore outsourcing, where resources were abundant and available at a lower cost.
What have we learned
This epidemic has had a jarring impact on companies’ ability to fully control their resources, no matter where they are, on land or offshore. We have learned a few things in recent months that will need to be addressed in the future.
- As countries have closed offices and employees have been required to work from home , important and varied unforeseen events have arisen:
- Some companies have found that their internal networks are not strong or secure enough for people to work remotely. Outsourcing companies that relied on their customers’ network have found that their performance has been heavily impacted due to network load.
For many offshore service providers, this created a problem they had never considered: What happens when employees have to work from home? They found that, in many cases, workers did not have computer equipment or stable and fast network access from home. Begging, borrowing and renting computer equipment solved the problem for some, but the lack of connectivity remains an open challenge.
Although many outsourcing providers have used video technology as part of their normal work arrangements, no one had anticipated that a great deal of emphasis would be placed on their day-to-day work. Many of the IT service providers have been overwhelmed by the amount of traffic they generated, which interfered with their normal operations.
Almost all outsourcing agreements require the supplier to have a well-defined and established “ business continuity plan (BCP) ”. But many of these plans have never been tested, so they have had little chance of working. Additionally, many BCPs identify “other location” within the country or in another country as their backup site. It has always been assumed that a catastrophe such as fire, flood or earthquake would be local and that a remote location would suffice. No one had considered the impact of a global epidemic.
How outsourcing will change
In general, as in times of natural disaster, it will take time to return to “normalcy.” However, there will be a change in the strategy and implementation of outsourcing globally.
Some of the ways that outsourcing will evolve are as follows:
- First, all clients will reassess their outsourcing strategy and implementation in light of their current experience. Some will prefer to increase outsourcing to cope with increased demands and a lack of on-site resources . Some will evaluate the strategy if their supplier has struggled to meet commitments. Companies may now consider implementing a ‘portfolio’ approach to outsourcing in which alliances are sought with creditworthy suppliers, or in addition, where services are distributed among different suppliers with separate locations, within and outside the country.
- Vendors will also look at their delivery models and examine the feasibility of performing services during critical times. Some will look to implement RPA and BOT which can simplify processing loads and can be deployed remotely.
- The biggest impact will be the critical examination of “vendor governance and arrangements” to see how the business continuity plan (BCP) is created and tested. We have learned that many of the BCPs were inadequate to address work from home and travel restrictions.
- Using remote video / audio tools and Internet-based operations to conduct normal business have stressed networks. Both customers and providers must evaluate the effectiveness of their network by considering different load requirements. Network and network-based applications will be critically scrutinized for security flaws and there will be pressure on service providers to fix them.
- Many companies will further examine their offshoring options and look for alternatives in the event of another global disruption. Location selection criteria will be modified to ensure continuation of services during difficult times. This may result in some locations being unable to compete with low-cost countries where infrastructure is a barrier to continued service.
These are new “normal” times, and once we reach a level of stability, clients and outsourcing providers will and should establish “lessons learned” and adjust their strategy and implementation. This pandemic has demonstrated the need for a robust governance process and the need to act ‘immediately’ when circumstances change.