The Politics of Fear: The year ahead

There’s no doubt this is an exciting time for our industry, but also a challenging, dangerous one as economic uncertainty in the US, Western Europe, and parts of Asia promises hard quarters for some, and a soft landing for others. I believe the UK economy will avoid recession by the skin of its teeth, but only as long as the property market does not tip into a downward spiral. One of the greatest threats will be the fear of it happening creating a self-fulfilling prophesy in the networked, always-on social media age. This could be a new phenomenon: if you imagine it, it will come.

Some economists are even talking about the “perfect economic storm” as a combination of the credit crunch, the expense of inter-bank money-lending, that teetering property market, soaring crude oil prices and widespread political instability – not to mention the forthcoming US elections – spell trouble for 2008. Interest rates remain low, but job security is a question mark in the back of many people’s minds. In 2008, economic turmoil means business failures, mergers, acquisitions, and takeovers; it means lay-offs and redundancies; it means a flight to quality, but also a flight from cost. It also means money will be finding safer havens (politically, and financially) and new opportunities in unexpected places, from emerging players like Vietnam, to growing customers like Japan – which has been culturally averse to aspects of the outsourcing model until now. Even as economic belt-tightening hits on these shores, there will be opportunities elsewhere for many in our industry.

This will be a time of cultural upheaval for many businesses – and some nations too. The ever-present threat of conflict between India and Pakistan could have far-reaching consequences for the world – not to mention countless outsourcing deals, from call centres and technical support to editorial services for many UK publishers.

This begs a big question: Do we and our customers have in place the outsourcing equivalent of disaster recovery: the ability to take business out of a warzone and place it elsewhere swiftly and with no loss of service quality to the customer? I doubt whether many companies have given this much more than superficial consideration – outside of a handful of truly global multinationals. Surely, however, the ability to manage and plan for unpredictability – once called ‘scenario planning’ – is the essential business skill for 2008 and beyond.

Beyond the unpredictable threats, many of the maturing outsourcing destinations of choice from the past decade are consolidating after enormous growth – India, again, being a notable example. Such consolidation means wage inflation for both skilled and non-skilled worker locally, and thereby the need for India to add more and more value to compensate for the gradual erosion of the attractions of low cost. Other nations will see that as an opportunity to muscle into the market.

What will that mean for potential customers? One thing is certain. Companies considering their outsourcing destinations will need to be politically sophisticated and have the confidence to back up their decisions. The attractions of outsourcing to, for example, Vietnam might be legion, but what will the untested PR implications be back home? This will pose complex questions of the relationship between some brands and their customers. The implication is that every part of the business must be involved in the decision to outsource. This begs another question: isn’t it time British business created a new job title: outsourcing director?

Data security and data transfer between continents will be more important topics than ever before. We all know about the political fallout of recent security lapses and data losses within the UK. But what these have revealed more than anything, perhaps, is that junior staff at the coalface, as it were, do not necessarily have even the basic skills to handle electronic data.

Beyond this, security lapses in contracts outsourced to Asia have seen a latent racism creeping to the surface in criticisms of that dynamic and vibrant continent, which has grown so successfully and with such skill. Surely there have been security lapses in the US, too, when confidential data transferred from UK public-sector clients to US sites have been lost. Has this led to widespread condemnation of American competence and employee skills? No, which calls into question the virulent criticism in some quarters of outsourcing destinations in the East.

And who is to be held accountable for such lapses? Ministers, perhaps, will begin to face criminal proceedings for breaking their own data security laws, or compromising the privacy and security of named and nameless individuals.

So welcome to the world of outsourcing, 2008 style. There will be opportunities aplenty for many in our industry, particularly when many customers and potential customers will need to tighten their belts and purse strings and outsource non-core functions outside of the UK. However, our industry and our customers may also face entirely new sets of questions – political, strategic, economic, security- and privacy related, and in terms of public relations. (Economic uncertainty is certain to breed customers intolerant of poor service and broken promises). We should have our answers prepared for the questions we will all face.

Posted by on 01/03 at 03:01 PM

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