One Man's View: What's in Store for Outsourcing in 2007

Over on Supply and Demand Chain Executive you can find Ben Trowbridge's predictions on the state of outsourcing for 2007. Given that Trowbridge runs the offshore advisory specialist Alsbridge, you can bet that he would have quite a lot to say on the subject. And that he does. But while most of his predictions are for the outsourcing market in general, some are particular relevant for procurement BPO or managed services. These include:

"Contrary to prevailing opinion, cost of labor in India will remain neutral when compared with wage inflation in U.S. market. The offshore trend will not subside." My analysis here is that India is poised to become a player in procurement BPO for lower value plays such as procure-to-pay transaction processing and management. But personally, I'm still not a believer that India is the right stop for higher value procurement BPO areas at this point, but my mind remains open, and I'm looking forward to visiting a handful of Indian providers in 2007.

"The major private equity firms will again review acquisition and rationalization of the large outsourced provider market. The fact that no deals were done in 2006 does not mean they have lost interest." My take: just as dozens of private equity firms have engaged sourcing consultancies in recent years to work with their portfolio, I would expect them to get on the indirect outsourcing bandwagon as well.

"Outsourcing of procurement will gain momentum in 2007 as certain providers begin to achieve true scale and market share as others continue to challenge them. The business case will become the velocity case." Amen, Ben. But in my book, the big question is whether the top providers in the sector have enough talent in-house capable of managing and executing on the volume of deals that very well could materialize in the Global 2000 in the coming years. For as we all know, this is not primarily a labor arbitrage game, unlike many other outsourcing areas, and expertise and process management is critical to success.

Jason Busch

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