Opinion

The outsourcing world beyond Covid-19

The Covid-19 pandemic has altered the business landscape for the world. Although, it is not as catastrophic as a meteor hitting the earth, the impact on business is going to be massive and enduring. The Covid-19 is not only a health crisis of immense proportions—it’s also an imminent restructuring of the global economic order. We have already seen the impact, globally, of this disease, and we are only at the beginning stages. We are in a “rescue” mode at the moment, and therefore, just beginning to fathom the long term impact on businesses, professions and the workforce. Most leaders are struggling with managing the impact on their business and have not had time to think through the changes they must make, long term, in their vision, strategy and direction.

Outsourcing of business processes has been directly impacted by the epidemic. Work from home edicts, total shut down of certain businesses, and lockdowns in some foreign countries have disrupted normal outsourcing operations globally. It would be useful to look back – but we are not even at the stage where we can look back and learn.  We must try to predict the impact on business decisions for both the customers and providers, as we try to adapt to a new normal. In one respect, this epidemic can be compared with the “threat” of Y2K, except that did not cause severe disruptions to businesses. But, it was the “threat of disruption “due to Y2K that led businesses to look at outsourcing as a strategy to protect their investment. It also led to the era of offshore outsourcing, where resources were plentiful and available at a lower cost.

 

What have we learned?

This epidemic has had a jarring impact on businesses’ ability to fully control their resources, no matter where they were located – onshore or offshore. We learned a few things in the past few months that will need addressing in the future.

  • As countries began shutting down on site locations and required employees to work from home, several unforeseen but important issues surfaced:

 

  • Some businesses discovered that their internal networks were not strong enough or secure enough to have people work from home. In fact, one of the largest investment advisors in the US had to have their analysts come to the office, in shifts, so they could maintain social distance and work. Outsourced businesses that depended on their client’s network found that their throughput was heavily impacted due to the load on the network.

 

For many offshore service providers, this created an issue that they had never considered; what happens when workers must work from home? They discovered that in many cases, workers did not have computing equipment or a stable, fast network access from home. Begging, borrowing and renting computer equipment solved the equipment problem for some, but the lack of connectivity remained an open challenge. This was exacerbated in some popular offshore destinations such as the Philippines, India, and Eastern Europe. In India, it was exacerbated by the shutdown of the transportation system. This further disrupted the option of access to equipment from other locations.

Although many outsourcing providers have used video technology as a part of their normal working arrangements, no one had foreseen the heavy emphasis being placed on it for daily work. Many of the IT service providers were overwhelmed by the amount of traffic it generated thus interfering with the normal operations.

  • Almost all outsourcing agreements require that the provider have a well defined and established “business continuity plan (BCP)” in place. But, if governance discipline did not exist, many were never tested and therefore had little chance of working. Also, many BCP’s  identify “another location” either within the country or another country as their back up site. It was always assumed that a catastrophe such as fire, flood or earthquake would be local and a remote location would suffice. No one had considered the impact of an epidemic on the entire nation and world.

How will outsourcing change?

Overall, just like in times of a natural disaster, it will take time to get back to the “normal”. However, there will be a shift in strategy and implementation of outsourcing globally.  Here are some ways I think it will change:

  • First and foremost, all customers will reevaluate their outsourcing strategy and implementation in light of their current experience. Some will prefer to increase outsourcing in order to deal with higher demands and lack of onsite resources. Some will evaluate the strategy if their provider had difficulty meeting commitments. Businesses may now consider implementing a “portfolio” approach to outsourcing where the services are distributed among different providers with separate locations – on and off shore.

 

  • Providers will also look at their delivery models and examine the feasibility of performing services during critical times.  Some will look to RPA and BOT implementation that can simplify processing loads and can be implemented remotely. In the U.S, one of the States contracted with an outsourcing service provider to implement RPA when their internal system could not bear the load of unemployment claims. Larger providers may distribute their operational risk by setting up satellite centers with fewer employees rather than having large campus like centers in few locations.

 

  • The biggest impact is going to be on critically examining “provider agreements and governance” 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 restrictions on travel.

 

  • Use of remote video/audio tools and internet based operations to conduct normal business stressed the networks. Customers and providers alike must evaluate their network’s effectiveness considering different load requirements. Network and network-based applications will be critically examined for security flaws and there will be pressure on the providers of those services to fix them.

 

  • Many businesses will further examine their offshoring options and look at alternatives in case of another global level disruption. Location selection criteria will be altered to assure continuation of services during difficult times. This may give rise to some locations that have not been able to compete against low cost countries where the infrastructure is a barrier to continuation of service.

 

These are new “normal” times, and once we get to a level of stability, outsourcing customers and providers will and should set up “lessons learned” and adjust their strategy and implementation. This pandemic has shown the need for a strong governance process and the need to take action “immediately” when circumstances change.

Although, there is hope this global pandemic is a once in a lifetime event, like the 1918 Flu, the world is different now. Experts are already warning that this will be around for a long time and there may be a second wave next year. Therefore, it is critical that businesses be ready and make changes now.

As the Queen Elizabeth II ended her address, we must also: “We should take comfort that while we may have more still to endure, better days will return.”

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