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What next in offshoring? Different folks will give different responses - Analytics, KPO, CRO, Moving up value chain, Product Development, Engineering Services, Consulting, Higher domain knowledge, Channel Development etc . This is like few blind men trying to describe an elephant. All are probably right in their own way but all are missing the big picture. This big picture in my opinion is offshoring for growth and innovation.

To understand future, we need to step back in past. The decade of 80’s was the decade of operation improvement in manufacturing, which was initially propagated by Japanese - JIT, Kenzen etc.

Later in 90’s, this operational improvement movement transformed into business process reengineering and six sigma, which was adopted by likes of GE and Motorola. The manufacturing out sourcing and later offshoring were logical extension of operations improvement exercise as it gave equivalent or even better quality at less cost. IT services outsourcing and later Business Process Outsourcing emerged as a next step in operation improvement after manufacturing outsourcing and offshoring. There is no wonder that pioneers in outsourcing and offshoring were once again companies like GE etc. The influence of six sigma and GE culture was such that GE top executives were in top demand for CXO level openings in the corporate world.

Now, companies having squeezed the maximum out of operations improvement for last few years , are facing their biggest challenge ever : how to grow in this complex and globalized world ? The signs of this shift from operations improvement to growth and innovation are visible all around us. The ousting of high profile GE culture CEO’s such as Robert Nardelli (Home Depot) and James McNerney ( 3M), and the reorienting of companies such as Home Depot and 3M back to growth and innovation is the sign of things to follow.

So, having established itself as a tool for cost cutting and operational improvement, if Offshoring is able to help companies in growth and innovation, then that will be next big thing in Offshoring.

How to distinguish between offshoring for operations improvement and offshoring for growth and innovation? Offshoring for growth and innovation is offshoring that directly helps in new revenue generating activities instead of reducing cost of existing revenue generating activities. However, skeptics may question, in a way we are reducing cost only so what is the difference? The difference is of orientation, end results, measurement criterias and most importantly, who is the buyer of these services? In offshoring for growth and innovation, end results are new products and insights, measurement criterias apart from cost and quality are time to market and end customer needs and buyers are sales and marketing, product development and channels folks rather than operations and IT folks.

Some of the examples of offshoring for growth and innovation:

• New products that were not financially viable earlier can now be done using offshore resources such as offshore equity research, which helps research houses to increase research coverage of more number of target companies ( KPO)
• Companies can use offshore resources to generate more insights about customers and develop better offerings , thus generate additional revenue ( Analytics )
• Companies can use offshore resources for doing market research on customers, competitors, markets and new technologies and developing their growth strategies accordingly ( Market Research )
• Companies can use offshore resources for reducing cost and time of new product development , thereby increasing products and chances of revenue growth ( Engineering Services, CRO )
• Companies can use offshore resources to provide consulting services about growth markets, which can help companies in developing and executing growth plans ( Consulting )
• Companies can use offshore resources in developing new low cost products especially for new customer segments and markets ( Product development )
• Companies can use offshore resource in developing new cost effective channels for selling products and services at low cost such as web enablement for traditional companies ( New Channels )

Further, offshoring for growth and innovation can act as a leveler for SME’s. Apart from big companies, SME’s can also leverage some of the services for growth and innovation using offshoring such as Consulting, Analytics, New products and Channels , which SME’s couldn’t afford earlier.

Is this the real big picture of what next in offshoring or am I another blind man with my own version of elephant? Only time will answer.

About Author:

Pareekh is currently handling business planning in a large MNC. Earlier he has worked as a management consultant advising on globalization and as a geek software developer. He has seen the industry from all three perspectives - Buyer, Service Provider and Advisor. What next in telecom, technology and globalization? He constantly seeks answer to this. He is alumnus of IIT Delhi and IIM Bangalore and can be reached at pareekhjain[AT]gmail.com

Views expressed here belong to the author and do not represent those of the ThinkingStreet or the author’s employer.

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