Research outsourcing in downturn: Does it make sense?

In order to evaluate the question above, we need to understand the underlying logic of business due to which the idea of outsourcing emerged in the first place. In the simplest term, businesses world over have always been driven by results.

Economics behind outsourcing

As explained in the exhibit below, in the face of perennially pressurized margins resulting from various factors such as growing competition, saturation in the existing markets etc. businesses, primarily in developed economies, have identified cost reduction opportunities in outsourcing a section of their non-core work to developing economies with the required resources – mainly skilled work force. The trend is strongly based on the fundamentals of economics. It started with lower end of a business value chain under the term ‘Business Process Outsourcing’ (BPO) covering services such as back-end customer support centers and slowly has spread further under the term ‘Knowledge Process Outsourcing’ (KPO) offering high end services such as design, software development, research etc.

India and various other South East Asian Countries, due to their English speaking, educated, intellectual and highly disciplined work force, have been able to offer a good business propositions to various clients based in the developed countries in terms of lower service costs. With time and due to rising competition, additional advantages such as time zone difference to provide 24 by 7 uptime (as observed in the case of Evalueserve prefer operating from Chile in order to support its global customers on 24 by 7 basis[1]), ability to offer support in languages other than English etc. (as observed in case of various BPOs supporting the Middle Eastern clients by operating from a cost competitive locations such as Egypt offering Arabic language support[2]) have been seen making difference to the outsourcing preferences.

Cost benefits being the principal premise behind acceptance of outsourcing of work, including that of Research industry, during the financial downturn period this practice even makes all the more sense.