Outsourcing in a Recession

Outsourcing and the associated Business Process Outsourcing (BPO) service providers are effectively all about cost saving, by offering cheaper labour to companies located in places where labour costs are higher – basically a labour arbitrage. On the surface it is good for the company, as it reduces costs; good for the BPO Company as it gets foreign investment often in a 3rd world country and good for the BPO workers as the job prospects improve.

Outsourcing is the partnership between individual companies for the good of all –
collaborating to balloon above the recessionary currents

Prior to the 2008 global recession, some companies looked at cost cutting and outsourcing as a way to making their ‘bottom-line’ figures more attractive to shareholders and new investors; gain a competitive advantage by having more resources (people) available, or spread the risk by not processing in one country. Since job opportunities were plenty, any job losses due to outsourcing were pretty much ignored or lost in hte noise of ‘musical chairs’ job moves.

Move forward a few months and once the 2008 financial crisis global recession begins to bite, companies are forced to rethink their cost saving strategies and unsurprisingly the allure of the BPO cost savings is even more attractive. However, governments and public authorities, who during the times of plenty turned a blind eye at job losses due to outsourcing, are now duty bound to protect against job cuts. Nevertheless, governments are forced to strike a fine balance between the free market economics and imposing a social moral obligation on privately held companies, who have their own viability to think about.

One solution available to cost conscious companies in a recession is to outsource only those tasks and jobs that, for the survivability of the company as a whole, must be feasibly outsourced – the needs of the many outweighing the needs of the few. Making people redundant is negative, irrespective of location, so identifying mutually agreed schemes such as fewer paid working days, unpaid holidays, rate cuts, etc., all go to retaining human capital wealth in the company, which is positive.

Another solution available to companies, in higher cost locations during a recession, is to re-evaluate their BPO service provider/partner and re-negotiate better rates. Additionally, companies should consider alternative BPO service providers, who are offering lower costs but maintaining/enhancing service and quality levels. Traditionally, India is seen as a low cost BPO location, but with emerging BPO markets in neighbouring countries and locations around the world, companies should not limit themselves exclusively to India and its BPO providers. Since the ‘new kids on the block’ will try harder and offer more for less, companies could, through the cost savings of switching BPO providers, be able to retain their on-shore staff and still make the bottom line figures look attractive even in a recession – winners all round, which can only be a good thing.