Making Sense of Offshore Outsourcing 2.0

As outsourcing continues to evolve, new yardsticks are needed to assess successful engagements and measure ROI. These tips will help you capitalize on the benefits offered by offshore, nearshore and onshore outsourcing.

By Arpit Kaushik
Tue, January 13, 2009

CIO — The phrase 2.0 has been bandied about since 2004 and it has become the de facto appendage to make a service offering slick, cool, hyped and worthy of attention of media and venture capitalists. But what does 2.0 mean? What is this new wave or generation or model of outsourcing all about?

First a quick recap of what various players mean when they use the phrase:

  • Outsourcing Institute's Frank Casale uses 2.0 to indicate a new way to buy, sell and manage outsourcing relationships which involves greater collaboration, collective wisdom, better communication among virtual teams and greater access to information.
  • Wipro talks about 2.0 being about strategic impact, mature relationships, multi-sourcing, risk-reward sharing and a joint approach instead of a typical client/vendor relationship.
  • A self proclaimed "global leader in Outsourcing 2.0" mentions its agile programming skills coupled with risk sharing and outcome based contracts as the key elements.

Other terms used to describe outsourcing 2.0 include:

  • Multiple languages, small time differences, independent specialists and cultural proximity.
  • A model that moves away from cost and efficiency towards value, effectiveness and innovation.
  • A model where one company acts as the front-end program owner, but all delivery is done through a network of low cost, best-fit partners.

And let's not even consider those who talk about outsourcing 3.0 and 4.0. Though it's worth mentioning that one author stipulates that in the 3.0 model, no more that 20 percent of any business' global headcount should be in the U.S., while another says the third wave is about "Indian outsourcing vendors swallowing entire departments of global corporate bigwigs"! (Both of which mean bad thing for IT jobs in the U.S., should they come to pass.)

And some analysts who say we are already in the third wave of outsourcing, where 1.0 was about IT outsourcing, 2.0 was about business process outsourcing and 3.0 is about knowledge process outsourcing.

Obviously, the choice of defining what it actually means lies with us. And at the same time, to be true and consistent with the original intention of the innovators and adopters who created Web 2.0, and to alleviate customer pain and confusion, it is also essential to follow a broad and standard set of principles.

What are these principles?

Web 2.0 talks about a platform based approach, moving away from silos to the network as a platform. It propagates harnessing collective intelligence and treating users as co-developers through an architecture of participation and democracy that encourages them to add value to the application as they use it. In Web 2.0., operations become a core-competency and lightweight, syndicated models become the norm. Finally, the market is a conversation with a rich user experience.

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