Outsourcing 2010: repairing of crisis contracts, part 1
Because of the economic crisis have many companies deployed aggressive scenario’s to cut cost. This resulted among others in stretching the definition of ‘non-core’ activities in order to outsource them to an external party (including selling off offshore captives to cash rich vendors). Balancing the benefits (cash for asset transfer, lower prices) with the risk, most companies opted not to engage in high profile, high value deals. To further reduce the risk, many companies outsourcing focused on contracts which used labor arbitrage and increased economies-of-scale to reduce cost. Complex transformations of business and IT which would increase the risk (and potentially reduce flexibility/agility when the economy picked up again) were often left out. This to the dismay of vendors as the hours related to these programs are an important area of margin for the vendor (and potential value for the client if done well). The pressure to cut cost thus resulted in a substantial volume of small