Traditionally, the outsourcing service provider community has viewed periods of economic distress, such as we are experiencing now, as an opportune time to initiate the outsourcing discussion with C-level executives in their targeted prospects. However, that hypothesis was tested and validated during previous downturns based on an outsourcing value proposition that was almost completely about cost savings and the liberation of capital budget to invest in other parts of the business.
As we have moved from the first to the second and, now, the third generation of outsourcing, the theme of the outsourcing conversations with many, if not the majority, of prospective customers is more often about innovation and more complex qualitative value propositions than about saving 10% on IT spend.
If the value sought by customers in entertaining an outsourcing initiative, at any scale or scope, is truly shifting from purely cost-based to something more ambitious, will the conventional wisdom hold during the current economic downturn?
The early returns, based on industry performance over the past six months, seem to indicate demand for outsourcing solutions during a downturn is perhaps agnostic with respect to any particular value proposition. If this challenging economic environment becomes protracted, it will be interesting so see if demand remains strong, what the structure and focus of the demand is in terms of processes being outsourced, and which decision criteria drive the plurality of new outsourcing contracts.