The days of bulk outsourcing of entire transactional departments to offshore locations are over but those jobs are not simply coming back home either. If they haven’t already come back to the country of origin, those previously offshored jobs are most likely be automated. According to The World Bank estimates, almost 69% of the jobs in India are likely to be directly impacted and are under threat from automation.
So is that the end of offshored outsourcing? It is certainly complicated!
The businesses that will thrive in the future will be those that can elevate their leadership sophistication and create blended teams comprising of highly educated offshored bespoke talent and local talent which is deeply knowledgeable on the contextual needs of local businesses.
So what does that mean in practice? What is leading to this? Let’s first go backward to understand how we reached where we are today.
The offshored outsourcing industry started two decades ago when western corporate looked towards well-educated and extremely cost effective Indians to undertake back-end IT work. The Indian market rapidly expanded, with over qualified Indians quickly moving up the value chain from BPOs (Business Process Outsourcing centres) to broadening their skill offerings to engineering, finance, research and many other ‘thinking’ jobs.
The Indian outsourcing revenue currently stands at around $150billion, as compared to the market size of less than $5billion in the early 2000s. Today, just like technology companies, all major global consulting firms, investment banks, engineering houses and blue chip corporates have set up large ‘knowledge hubs’ in India for high end ‘thinking work’. Moreover, the originally offshored transaction work has either been automated or has been migrated to countries that offer more competitively priced skill based resources and lower cost jurisdictions.
Business heads are increasingly concerned that the immediate cost reduction “sugar hit” in the long term may cost more due to the loss of integrated ideas generation and teamwork for innovations and growth. Western corporates are now under pressure to ‘bring jobs home’ whilst simultaneously needing new skills that may not be readily available in their domestic market. To add to this, some of the most talented western professionals are increasingly pursuing flexibility in professional projects with an aim to achieve work-life balance and purpose rather than simply being employed with job security and incremental pay rises. The Indian talent which the bulk offshoring suppliers rely on is also getting wiser. A pertinent question for the aspiring young Indian professionals is why are they still dreaming of working for big brands and sitting in a knowledge hub like a battery-hen, when they can be an entrepreneur in the world’s fastest growing economy. The young Indian diaspora which historically departed for universities abroad - never to return is now increasingly coming home after 5 or 10 years in London or New York. Recent analysis by Deloitte suggests a tenfold increase in Indians abroad looking for work, back home in India.
So how does western business continue to leverage skills and innovate in this context?
The returning Indian diaspora and aspiring young Indians still put a premium on keeping some international projects on their CV. The cost of these highly skilled global Indians for western business is still 50% lesser than an equivalent local westerner. For western businesses to access that arbitrage and skills, they need to attract Indian talent and ensure a regular generation of integrated ideas and innovation in the business, a rather impossible scenario with bulk offshoring. However, it is still a possibility through more sophisticated blended teams. This means that companies needs to put together teams that are assembled with a healthy mix of onshore and offshore talent, with each of the team members leveraging their skills and working collegiately for a common goal. Onshore resources will have a skillset leaning towards deep business context knowledge, leadership and cross cultural coordination, whilst offshore professionals can add value with their specialist technical knowledge.
How will this happen?
Well if a simple mobile app can coordinate millions of cars across the world to millions of people on thousands of roads in multiple languages – it shouldn’t be too hard to replicate this on the work-front landscape. Platforms that match simple tasks to workers are now a common phenomenon. Expensive head hunters already rely on large databases of high end professionals for suitable executive jobs. Clearly, the data and its architecture exist but it’s still not being shared. The world just needs to put these three pieces together in order to create a free-flowing talent and skill based economy and there are businesses already doing this. The bigger question for western businesses that want to thrive in emerging economies of the world is- Are your leaders ready for it?