Transformational Outsourcing

During the past few years, we have heard a lot of whining in the media about outsourcing and offshoring. Let’s look for the opportunities in these irreversible trends (and ignore the whiners!).

By fully leveraging offshore talent (a strategic view of global sourcing) we can improve productivity, increase quality, and create American jobs. Yes, I said “create America jobs.”

An aggressive outsourcer in Pasadena, California named IndyMac Bankcorp has risen from the twenty-second largest U.S. mortgage issuer to the number-nine position in only three years. According to IndyMac’s CEO, they are more productive, more cost efficient, more flexible, and provide better customer service than the competition because of IndyMac’s outsourcing and offshoring partners. India’s Exlservice Holdings (with a staff of 5,000) handles over 30 of IndyMac’s back-office processes, including bill collection and the “welcome calls” that assist American customers. IndyMac is also using New York-based Cognizant Technology Solutions Corporation to develop next-generation software, which will increase productivity by as much as 20% by 2008. All of this outsourcing and offshoring has led to explosive growth. IndyMac has doubled its American workforce, in just four years, to almost 6,000 jobs.

Charlotte-based Wachovia Corporation has a $1.1 billion deal with India’s Genpact to handle finance and accounting jobs, and a separate deal with Illinois-based Hewitt Associates to handle administrative and HR programs. But, it is not just about cost savings, it’s about growth! Wachovia plans to invest up to 40% of the $600 million to $1 billion in savings in core business growth. Wachovia’s Director of Corporate Development believes this is what is necessary to become a “great customer-relationship company.”

Eli Lilly and other “big pharma” companies are facing unsustainable costs to develop new drugs. Lilly now does 20% of its chemistry work in China for one-quarter of the U.S. cost. Lilly plans to expand these efforts into Russia, China, India, and Brazil.

Many new companies are using outsourcing and offshoring from the start. California-based Crimson Consulting Group (with only 14 full-time employees) is able to compete with the world’s largest consulting firms (including McKensey and Bain) by offshoring research. Crimson uses India-based Evalueserve, as well as independent experts from around the world.

Wise leaders (and consultants) are now asking for articulate outsourcing/offshoring strategies. Are you familiar with the wide array of business services, software development, and call center resources that are currently available?

For more discussion on this and related topics, please see my book entitled “Strategic Organizational Learning.” And, for free articles and other resources visit my website www.mikebeitler.com.