How Will BRIC Impact Your Outsourcing Strategy?
“If you thought BRIC growth was hot, you haven't seen anything yet.” – Goldman Sachs
1. Diversity - Although the talking heads at CNBC sometimes refer to BRIC as if they are a monolith, there is no such thing - it’s a big, diverse, complex set of geographies separated by a lot of miles, time zones, languages, and cultures with a mix of developed and emerging economies.
2. Selling or Servicing - How you view BRIC depends on whether you’re thinking about selling into or servicing your business out of those countries. In the New Normal, your CEO is most likely thinking about both - and outsourced solutions can help reduce the time, cost, and risk of getting there.
3. Business Model - When it comes to selling into BRIC what works here, both features and price points, will likely not work there. It may take a business model change to be able to serve the emerging markets cost effectively. It may also take some M&A to enable you to develop and sell products to China.
4. Operating Model - When it comes to servicing your business out of BRIC, buyers are mitigating individual country concentration risks by developing multi-location portfolios and moving toward globally integrated delivery networks.
5. Locations – According to the Everest Research Institute’s Offshore Locations: Buyers' Perceptions and Plans for 2011-2012 traditional offshore locations such as India and Philippines will continue to grow as “hubs” for IT and customer service. The trend toward Tier 2 cities will accelerate – particularly for companies already operating in Tier 1 locations. China is now approaching status as a mature outsourcing destination but more as a regional delivery hub rather than a global hub. Brazil, Malaysia, and Mexico are other locations that will see growth. By the way, if you currently use offshore locations and have 8-10 spare minutes you can contribute to the research on location trends by participating in their 2011 Market Vista Offshore Locations Survey.
In the past, many organizations developed a fragmented base of delivery locations and suppliers in an effort to optimize cost and capabilities. Unfortunately, that approach often resulted in a difficult to manage supply chain which didn’t always deliver the hoped for cost or quality.
In the New Normal, the pendulum will swing toward organizations creating a smaller number of more strategic hub and spoke locations supplemented by suppliers who can reduce the time, cost, and risk of entering and serving emerging markets. Buyer organizations will particularly benefit from suppliers with solutions designed for emerging markets to help provide the features and price points required for growth.
How will BRIC impact your outsourcing strategy?