Rightshoring

As each business service is analysed down to its key components, it is possible to identify the optimum location for each process. Capgemini has even trademarked the term ‘Rightshore’ and defines it as a business model that ‘cuts across geographies to access the right service, in the right place, at the right price.’ The principle of rightshoring is now becoming accepted in all aspects of outsourcing, whether it be IT or business process outsourcing and according to Capgemini, offers ‘the most advantageous mix of resources worldwide, lowers costs and boosts business performance.’

Rightshoring is also cited as enabling outsourcing organisations to spread the risk and certainly there are merits in having multi locations for critical processes, even if they are only used as a backup as part of a disaster recovery platform. Given the number of countries that now claim to offer offshored services of various kinds, (Gartner identifies at least 59 challengers to India’s pole position) rightshoring offers more than Capgemini’s assertion of ‘The best of both worlds’, but rather truly can offer the best of ALL worlds.

Strategic rightshoring requires a more in depth analysis of the processes outsourced and a review of the services provided by the different outsourcing service providers. Selecting the most appropriate destination for service provision will depend on a complex variety of factors, including the nature of the service, expertise of the preferred service providers, the available skill sets in the potential locations, labour costs, infrastructure, time differences, customer and investor requirements, union attitudes, and the competition’s outsourcing strategies.

There is no absolute right or wrong location for a process, but common sense needs to be applied when considering the most appropriate location. For example, a process that requires lots of voice communication and a strong cultural understanding, such as vehicle breakdown call-outs, may be best placed onshore nearest to the end consumer. Other, more structured information based voice interactions, such as bank balance information or transfers, can easily be carried out offshore. Email communications are geographically neutral and can be carried out in the most cost effective location.

Some organisations are implementing a ‘follow the sun’ outsourcing strategy to facilitate 24x7 services – ie the customer calls are directed to whichever location is operating within normal working hours – a policy that saves money through not having to pay premium wages for anti-social hours, and contributes to lower attrition rates for the same reason.

Non-voice work and back office processing can be carried out in the optimum location for the particular business service, and an offshore location is often the most appropriate solution, provided training programmes in language and application skills are put in place. And India has demonstrated its particular aptitude for back office processing.

Just as China has become the world’s factory, India will become the global back office. China has shown that it can manufacture a wide variety of high quality products from small electronic consumer items to cars and computers at a much lower cost than its competitors. Fewer consumer goods suppliers are actually manufacturing their products themselves but are outsourcing to China and this is a trend that is being applied across the globe. For example, 50% of the world’s cameras are made in China, which also accounts for 25% of the world’s washing machines. Take a look at many of your branded household items from white goods to clothes and you will find they are made in China, despite bearing the name of a western brand or designer.

In the same way that manufacturing is outsourced, it is becoming less cost effective to carry out time consuming and labour intensive back office transactions in- house. And as business processes become more and more standardised, the argument for retaining back office functions in-house becomes less attractive. Focus on core competences will increasingly become the driving force in successful business, so companies will become more imaginative in their outsourcing strategies

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