Outsourcing can be a touchy issue. In the US it's about jobs being lost in the local economy to outsourcing bases in India. If the same argument is repeated in India, it would have businesses bristling at the criticism and arguing that it represents an assault on free market forces.
In the Middle East, outsourcing has had a limited audience even though many in the tech industry have spent years talking up its virtues. With the downturn, even the talk subsided as businesses were looking for all possible ways to cut spending.
Now, with regional economies returning to some health, outsourcing is back on the agenda. Last week, an Arab Outsourcing Conference was held in Dubai.
Gaurav Gupta, managing partner at India's Everest Group, was a speaker at the event. He gives his thoughts on where outsourcing stands in the Middle East.
Gulf News: Tech outsourcing has never built up a dedicated following among Middle East corporate houses. Do you see anything changing the status quo?
Gaurav Gupta: While the concept is still not mainstream, there is definitely more than a passing interest on the subject. At the recent Arab Outsourcing Conference in Dubai, there were retail and investment banks, petrochemical companies and others sharing how they have utilised — and how they want to use — strategic IT sourcing to drive their growth and competitiveness. With regards to the changes in the status quo, I believe three things have made an impact — one, after the downturn most businesses have realised they need a strong cost position and flexibility.
Two, as growth picks up there are time-to-market pressures and, three, there is a strong desire to incorporate best-in-class practices and expertise into business process and IT operations. Outsourcing isn't a magic bullet, but well-crafted strategies and execution can support several of these business imperatives.
What are the factors holding back the transition?
There are both demand [customer] and supply [vendor] side issues that are impacting adoption in the Middle East. On the demand side, there are many large, but state-owned enterprises. In such a situation, potential job losses and commitment to local job creation impact adoption. Additionally, we see that buyers are yet to adopt a more strategic view of how outsourcing can help.
There is a tendency to take a purely cost-view with reverse-auction type request-for-proposal processes. Such processes do not necessarily bring out the best from the market and hence limits the imagination and experience of customers with regards to the possibilities that sourcing can offers.
And on the supply side?
The market has so far been seen primarily as a hardware market and not a significant services market. Services are mostly limited to staff-augmentation and body-shop type engagements or package implementation.
It's only recently that large global providers have extended more service-based offerings in the region and Indian offshore majors have also started to make a more serious attempt at developing the market. There are now instances of players establishing local or regional centers and deploying senior management time and attention to the region.
From an overall perspective, it will take more innovation on the part of the buyers and suppliers to develop models that adapt to the uniqueness of the market.
Do you feel that the creation of BPO clusters within the region could overcome this reluctance to an extent?
Yes, IT/BPO clusters are extremely important for the development of the sector in any region. When clusters are formed, talent moves in, senior management sees it as a viable option, entertainment, education and training support systems start to develop and the sector builds its own momentum.