The question of where in the world to source services is becoming increasingly irrelevant as automation takes on more and more of the work. Credit: Thinkstock Recently, an enterprise client was debating whether the offshoring ratio — the percentage of resources located off versus on shore — proposed by a service provider was too high, too low or just right. About a half-hour into the conversation, I realized we were asking the wrong question altogether. Trying to discern what constitutes too much risk when it comes to offshoring has been a common exercise for years. After all, the cost implications are significant. Service providers tend to get aggressive with offshoring because a) they have more people there, and b) it allows them to present a lower total cost when competing for business. Sourcing buyers, however, especially less mature ones, feel more comfortable with a larger onshore presence and may or may not understand how it impacts their business case. Does the question about percentage of resources offshore matter? I’d say, not very much. The world has changed. First of all, most providers that work with Fortune 500 clients are large and experienced — they are not in the business of taking on more risk than is reasonable. More importantly, as long as they commit to service levels their customers find acceptable, who cares where the work takes place? The challenge, contractually, is to make sure service levels trump all else to keep the provider focused on what does matter. But the real reason the offshoring question doesn’t matter is because it is an obsolete one. It asks: Do you want expensive human resources close to you or do you want cheap human resources far away from you? And the answer to both of these is no. What you really want is a non-human resource. You want to automate as much as possible so human creativity can make a difference elsewhere, where it counts. When software robots reduce the volume of work related to repeatable processes, humans can then focus on what the robots cannot do. Instead of counting bodies, you want an aggressive rationalization program that reduces the number of applications you have to maintain (and thus the number of people maintaining them, regardless of where they sit). You want strict compliance where it matters — places where robots are demonstrably better than humans — and extreme creativity elsewhere. (Some humans still have the edge here, but they are rare, and you should hire them wherever they are.) It will take time for companies to move away from the obsession with offshoring ratios and what they consider to be the risks they pose. Today’s outsourcing buyers and providers should be asking a different kind of question about risk: What are the risks of not automating these functions? And what new risks does automation create? The offshoring debate is yesterday’s debate. We need new incentives to encourage no-shoring — an environment where physical location is meaningless because code does the work. Related content opinion Digital done wrong CIOs must understand that digital experiences start with the customer and work backwards into the enterprise. By Esteban Herrera Nov 16, 2017 4 mins Outsourcing IT Leadership opinion How application development and maintenance has become a loss leader Agile, cloud, ready-to-buy platforms and other advances have eroded the statusu2014and the marginsu2014of application development. By Esteban Herrera Oct 20, 2017 3 mins Agile Development Budgeting IT Leadership opinion Turning the ship toward automation Today's enterprises rely on their IT service providers to help them automate processes and get to market faster. But automation requires a whole new way of delivering services, which thrusts today's service providers into the midst of massi By Esteban Herrera Feb 02, 2017 4 mins Technology Industry IT Skills Outsourcing analysis Connectivity is the new currency What is the key to digital business today? One word: connectivity. By Esteban Herrera Jun 27, 2016 3 mins Technology Industry Outsourcing Internet of Things Podcasts Videos Resources Events SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe