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Story URL: http://services.silicon.com/itoutsourcing/0,3800004871,39348162,00.htm

Recession: Time to play fast and loose with outsourcing
Buy now, fix later

By Tim Ferguson

Published: Thursday 20 November 2008

The economic downturn will force businesses to simplify their outsourcing and offshoring agreements to generate faster returns on investment and reduce risk - even if that means glossing over problems in deals and fixing them later.

Tech Hotspots: The list

1. Silicon Valley
2. Bangalore
3. London
4. Tokyo
5. Boston
6. Cambridge
7. Shanghai
8. Tel Aviv
9. Seoul
10.Beijing
11.Chennai
12.Pune
13.Singapore
14.Helsinki
15.Moscow
16.Hong Kong
17.Hyderabad
18.New York
19.Sydney
20.Shenzhen

Speaking to silicon.com, managing director of global research for sourcing advisory firm EquaTerra, Stan Lepeak, said: "In general, firms will outsource more - they'll become more narrowly focused on their goals."

Lepeak said the primary drivers for companies when negotiating outsourcing and offshoring agreements during the downturn will be to cut costs as quickly as possible.

As a result, objectives such as process improvement, innovation and transformation will become less of a priority.

"Outsourcing as a tool is probably more important than ever right now but you want to use that tool in a way that it's very clear how you're going to apply it, what you want to get from it and when. This probably isn't the time to be overly ambitious," he said.

Lepeak said businesses will also try to negotiate agreements more quickly, or "speedsource".

"You don't necessarily want to cut corners and be too hasty but you need to recognise that in difficult times you might need to accelerate the process and identify some things that you may have to go back and fix later," he continued.

It's a process that would be helped by consolidating outsourcing and offshoring providers and staying with those known to be safe choices rather than pursue agreements with new suppliers, Lepeak noted.

He added larger, more established offshoring regions such as India should benefit for the same reasons - while newer destinations such as Vietnam could be seen as more risky despite being cheaper.