Outsourcing In Economic Downturn

An interview with David Leabeater, VP - Business Development, AppLabs, UK

“When times are good, outsourcing is just one of several alternative strategies: “Do It Yourself” or “Leave It Til Later”. But when times are hard, the DIY option becomes increasingly unaffordable, especially when investment funds for new tools, methods and techniques have dried up.”

  1. The outsourcing market is key to AppLabs ambitions. For our target markets, is outsourcing still the right strategy in the current economic climate?

    Outsourcing is more relevant than ever: guaranteed savings, better service, more flexible and agile operations and operational responsibility transferring to the supplier. Done right, outsourcing is very relevant for today’s business.

    When times are good, outsourcing is just one of several alternative strategies: “Do It Yourself” or “Leave It Til Later”. As for the “LITL” strategy, business leaders are under huge pressure to act now. Cost control and quality robust services are a must. The ‘credit crunch’ has also put past anxieties about outsourcing and offshoring into perspective. There are few ‘sacred cows’ in business these days and less concern about what the public, unions or other stakeholders might think.

  2. Will outsourcing retain its popularity in the current technology downturn?

    Not all types of outsourcing will thrive. Many of our competitors used outsourcing as another way to sell high priced on-site consultancy, software and equipment. There claims go like this: “Sure costs would go up at first and there’d be a couple of years of minor disruption, but in the end result will be worth it…” Most clients don’t have the money or time for this sort of thing.

    Outsourcing will be more popular than ever if it delivers a leaner business case. Clients will want featuring big savings, early payback, smooth transition and minimal up front client investment. Outsourcers will need to offer a tailored service that stitches together all the change tools: offshoring, consultancy, automation, account management.

    Popularity will go hand in hand with trust. Earning trust and keeping it will be key. Client retention, excellent delivery and referenceable accounts will be a must. Clients will prefer people who are easy to do business with. How do we do that? Listen. Understand. Respond.

  3. What is the impact of the current economic climate on outsourcing of testing services?

    QA and testing services are even better placed than the Information Techonology Outsourcing (ITO) market. It helps if, like us, you are the biggest and best in the world. And our independence is also precious: business leaders increasingly see the need to separate testing from IT development.

    Some clients are already inviting testing-only proposals. Even where the RFP joins testing with IT development, clients are increasingly looking for testing to be separate, and ideally from a separate supplier as part of a partnership.

    I’m also excited about the prospects of what I call the wholesale testing market. Many of our customers will be ITO providers themselves with existing ITO contracts and accounts who ask us to take over the QA and testing elements of their contract. Why? They know we are cheaper, better and faster. We can help them improve their bottom line and deliver better services to their clients.

  4. What are the growth prospects for independent testing companies in the present time?

    Growth prospects are great, but we will need to be imaginative and responsive. We will need to respond to the new realities our clients face and the new markets that are emerging.

    The prospects are not so great if stick to the tried and tested ways where we are likely to face increasing pressure on revenues and margins. Clients may find it harder to fund consultancy and projects. Many will be looking for much more offshore-centric solutions.

  5. What is your view regarding sales increase in the current time?

    Overall, I see an increase in the number and proportion of sales featuring offshore-centric delivery. We will see a significant and progressive increase in outsourcing deals, either as stand-alone services or in some form of partnership. These sales will occur across all regions in our geography and across sectors.

    We will see a significant increase in the number of new name accounts and new types of markets such as the wholesale sector I described earlier. I expect many sales to start with an initial engagement of limited revenue that will be our chance to prove ourselves. On the back of excellent delivery that will grow into more and larger work orders often evolving into longer term outsource contracts.

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