Source Superstore [1/7]: Outsourcing’s past and future

The Source Superstore is now open!  To celebrate this opening, we’ve produced this seven-part publication which explores why, and how outsourcing is the most powerful and transformative business tool in existence today.  First, we start with outsourcing’s past and future.

How and why outsourcing can transform your business

Don’t miss out on this seven-part publication which explores why, and how outsourcing is the most powerful and transformative business tool in existence today.

• Source Superstore [1/7]: Outsourcing’s past and future
• Source Superstore [2/7]: Growth of outsourcing is unstoppable
• Source Superstore [3/7]: You can’t afford not to outsource
• Source Superstore [4/7]: Marketplaces and aggregators
• Source Superstore [5/7]: Productised outsourcing services
• Source Superstore [6/7]: World’s widest range of outsourcing products
• Source Superstore [7/7]: Biggest range, best prices

How outsourcing started

In the beginning, outsourcing was only an option for giant international corporations.  It is only recently, that it has been viable and available to smaller business, and now even individuals and ‘solopreneurs’… however, most people are still unaware of this incredible opportunity.

Outsourcing, as we know it began about 25 years ago.  The Philippines and India were the first countries to provide outsourcing services.  The dealt companies provided outsourcing in direct partnership with a client company – with the client company pretty much paying for, and setting up the whole facility – with the assistance of the local company.

Back then, for a company to outsource meant a huge upfront investment.  The company was required to set up legal entities, construct offices, and build servers, networking and infrastructure, and provide all hardware and training.  The costs were so great, and the hurdles so complex, that it would not have made sense to outsource any less than 1000 people at a time. Typically, the big businesses that initially outsourced, would relocate 10,000+ jobs at a time.

Technicals of outsourcing

Originally, outsourcing was telephony based, and was enabled as the price of international communications dropped.  As you can imagine, when the functions were limited to basic telephony, the possible outscoring roles were significantly more limited.

Then the internet happened.  

Initially internet functionality was limited and clunky, but it meant that a broader range of data entry type jobs could be done.  This removed people from direct services (customer service), to more back end operations.

The trajectory, capacity and competences of outsourcing then rose alongside the evolution of the internet.  In the beginning the internet was very basic, and had very low adoption rates. As you know now, the internet is ubiquitous, and touches every part of a business.  Alongside the internet, came incredible computing power. Now, almost everything is cloud based, and services can be rented as capacity requires. Much of software, that enables businesses today, is in many cases free, or close to it.

As the world moved onto computers to ‘do their business’, it meant that most of any jobs that are done from in front of a computer, could also be outsourced.

There is a saying that basically anything that is done in front of a computer screen – can be outsourced.  And now, today, virtually everything in 80% of businesses is carried out from in front of a computer monitor.  That has huge implications for outsourcing, and employment generally.

Sales cycle complexity

Back in the old days of outsourcing, things were very complicated.  As mentored above, it was a major strategic and operational feat to set up an offshore outsourced operation.  As a result of this complexity, it made outsourcing sales processes very long and complex. If you were moving 10,000 roles to a new foreign country, you could guarantee that there would be a super complex tender, and due diligence process.  The stakes were incredibly high, and as such, it was the epitome of big businesses doing big business with big businesses.

The complexity of the sales, cycle, due diligence, setup and on-boarding further meant that small jobs weren’t viable for either the outsourcing service providers, nor the clients.  Everything was so rigid and structured, which meant that client acquisition and onboarding costs were astronomical.

This meant that things moved slow, and were clunky.  It meant that BPOs would only consider jobs with maybe 100-500 seats minimum, and would require a 2-5 year minimum commitment.  

Clearly, this kind of scale and commitment meant that the outsourcing sector was completely out of reach of the SME market.  They were basically completely excluded, until recently…

Slowing of growth

There has been an incredible growth in outsourcing over the last 20 years.  Once the world’s big-business realised the incredible opportunities in outsourcing, they all flooded over to The Philippines and India.  Fast forward to today, and you would be hard pressed to find one big organisation that doesn’t outsource some of their staffing.

Outsourcing has become so big for the Philippines, that it is now the single biggest industry in the country, and contributes over 10% to the GDP.

Then, more recently the growth started slowing down.  People become fearful that the outsourcing boom was over, and the industry leaders started referring to it as a ‘sunset industry’…. Growth has indeed slowed, but the future growth of outsourcing has far from stopped.  

In fact, outsourcing has only just begun…

Democratisation of outsourcing

In the last 10-15 years, a smaller breed of outsourcing suppliers started appearing.  As with any industry the outsourcing service provision became more fractured and diverse.  New entrants created a broader range of products that served and suited a broader range of clients and client needs.

This change was partly facilitated but the exponential cheapening of infrastructure provision.  As has happened with technology generally, it became many many times cheaper to provide the hardware, servers, internet connectivity and infrastructure that enabled outsourcing to become more cost effective and accessible.

This meant that outsourcing could not only be supplied for cheaper, but it could be increasingly flexible on its terms.  As with many things in business, outsourcing supplies changed from a massive commitment and super high investment and upfront costs, to a more simplified, cheaper service based on a monthly cost, with relatively unrestricted contract term lengths.

This meant that outsourcing well and truly become accessible to the smaller businesses of the world.  

This has only happened in the last 10 years though, and it remains one of the business world’s best kept secrets…

Engaging with Outsourcing

The ways that people engage with outsourcing have-not kept up with the general modernisation of the industry. The industry has gone through incredible transformation over the last 10 years, with the sector now able to provide almost any business service to any business sector.  Professionalism, and skill development has increased beyond comparison, infrastructure costs are a fraction of what they were, and the sector is more flexible than ever with its terms…

However, the industry has not modernised its sales process, and the world is still blissfully unaware of the outsourcing opportunity.  Outsourcing is modern sector, but its sales and marketing is stuck back in the dark ages.

The industry has responded well in catering for the SME market, where previously they didn’t, but their sales and marketing approaches have not.  Their sales and marketing approaches are still using big-business, enters level approaches – and that isn’t relevant for small businesses of today’s fast-moving world.

Until now, there has been no centralised marketplace for outsourcing. And the world desperately needs one…

SMEs have a mentality and a purchasing process not too dissimilar to a consumer.  They make far quicker directions and big business, and often they are made by just one, or two people.  Decisions are quick, and the decision making processes are limited. Business owners are busy and so they don’t want to spend countless hours (and big dollars) on research, feasibility studies, tender processes and complex contractual agreements.

They want a simple outsourcing marketplace, where they can educate themselves, and then browse compare, and shop – all simply, safely and quickly… use as they visit online marketplaces for flights, hotels, and clothing…

The future of outsourcing is in SMEs….

The outsourcing industry will grow 10-100 fold over the next few years…

There are 35 millions SMEs in the West, employing 100m people, with $12tn combined revenues.  And very few of these companies are outsourcing – 0.5% of that….

The world is moving increasingly online.  More and more tasks, are being done from in front of a computer.  The internet and software interfaces are getting increasingly powerful, which makes outsourcing cheaper and more accessible to all.  The future of outsourcing is in the SME market – eventually, ALL SMEs will outsource…

The market needs to keep up with this trend.  Not only does the product need to evolve, but the way that the product is sold, consumed and delivered needs to keep up.

Price war, and commoditization

Over time, we are seeing the outsourcing sector mature and consolidate.  There are new startups in the outsourcing space all the time, but product innovation has slowed and consolidated, and pricing is becoming far more competitive.  As the sector matures we will see increasing price and service homogenisation, decreasing margins, and a general commoditization of services. The industry is already witnessing this.  This is most certainly a good thing for the consumer, but it means that the suppliers have to run and incredibly efficient product, and provide a great service – otherwise they will not survive the increasingly competitive landscape…

It is good to see the common signs of industry maturation within outsourcing, however, it is still a long way from maturity and widespread adoption – and this is hurting the industry and hindering its widespread adoption amongst Western businesses.

Despite now a relatively mature industry, there is still only a tiny fraction of business that actually outsource. It stands to reason that eventually everyone (ie every company) will outsource.  We see that already almost all of the big business is outsourcing, but only a tiny fraction of the SME sector is doing it. There are estimates that only 0.5% to 1% of business are outscoring at this moment…. That leaves and incredible growth opportunity and trajectory for the industry.

Standardised services for easier engagement

The future of outsourcing is in the SME space.  And SMEs consume services in a similar fashion to consumers… For people to get interested and engage in outsourcing, there have to be easier ‘on-ramps’ into outsourcing.

People have to be able to start outsourcing without it being such a big financial and emotional investment.  People are now used to accessing many incredible services and softwares for free – or very close to it. People generally prefer and expect having little or no tie ins…. And outsourcing should be no different.

Of course outsourcing is different, very different, as you are acquiring ongoing employment services, but if there are too many hurdles, surrounded by too much uncertainty and unknowns, then the business simply won’t make their first step into outsourcing, and the industry will regress…

The Source Superstore offers a range of off-the-shelf products, which get them started, easily, quickly and safely, on their outsourcing journey.  The Source Superstore offers small simple packages, at easy price points, so the initial commitment is low. These functions make it easier for people to take that first step, and give outsourcing a try.

The Superstore is also standardising outsourcing products and services for the consumer.  When products are more easily reviewed and compared, people can buy with more confidence. Currently there is no standard pricing protocols for outsourcing.  Pricing is generally opaque and complicated. Pricing is often not written on websites – it is only revealed on further inquiry. This is typical of complex industries, but as we have discussed, it no longer suits the SME market.  It simply perpetuates the long sales cycle, and increases the complex on-boarding… This current situation really benefits the supplier, to the detriment of the consumer…

The Source Superstore is leading the charge in the modernisation of the outsourcing sector.  Services need to be clear, and simple. Prices need to be clear and simple. Pricing protocols need to be standardised and deliverables need to be easily quantified, comparable, and reliable.  And the Superstore is doing exactly that.

Read the full seven-part publication

Don’t miss out on this seven-part publication which explores why, and how outsourcing is the most powerful and transformative business tool in existence today.

• Source Superstore [1/7]: Outsourcing’s past and future
• Source Superstore [2/7]: Growth of outsourcing is unstoppable
• Source Superstore [3/7]: You can’t afford not to outsource
• Source Superstore [4/7]: Marketplaces and aggregators
• Source Superstore [5/7]: Productised outsourcing services
• Source Superstore [6/7]: World’s widest range of outsourcing products
• Source Superstore [7/7]: Biggest range, best prices