Slowing US Economy – What is the fate of outsourcing providers?

I would first categorize the outsourcing providers before predicting their fates:

  1. Selfish – “Sell Services at all cost”
  2. Body Shops/Virtual Captives
  3. Strategically Customizable Partners

Selfish: The ones who would try to sell their services at all cost (sometimes much lower than realistic). They would do this even at the cost of not understanding the customer’s real business needs and pressures (the pressures which will be tougher in these times) – The customers would need vendors who can understand the real pressures they will face and adjust the delivery models and value propositions accordingly. On the contrary, during these times you would start coming across alot of such vendors who will pitch the lowest costs (apparently). They would be doing this to sustain their existence through whatever cash-flow they can keep generating. However you need to keep a fair distance from such vendors – as they’ll not only themselves fail but will play their part in getting you failed too! (doomed is a bit too strong of a word)
Body Shops/Virtual Captives: Body Shops/Virtual Captives (providers renting out dedicated resources), the captives and the ones in between they will get a hit but the effect will be neutralized by the need for cutting down costs by offshoring more resources to these body shops and virtual captive centers. So there would be a mixed trend with these type of vendors.
Strategically Customizable Partners: I would put in this category the providers who have spent enough time (even at their own cost) in understanding the business models, plans and revenue cycles of their customers. These are the ones who can connect with their customers at a strategic frequency and understand the SWOT position of their customers. At the same time they are agile enough to customize their service offerings in order to create a real strategic value for their customers (esp in the context of a tough economy). I understand that the word “strategic partners” and “synergy” are so over-used and abused that it adds further to the confusions and frustrations of selecting the right service provider. However, there are a few litmus tests which can serve as a good filter.

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