Current Financial Crisis and Outsourcing

It will be very interesting to bring these two together and predict the outcome. The pundits have already given the verdict in favor of the outsourcers. Bad Financial Market will lead to more cost optimization. This will directly or indirectly ask for more outsourcing. It may not be so simple as this.

In the current scenario, no one will be surprised if the outsourcers are badly hit. Possibilities of a bad year will not surprise anyone. It will be interesting to see if this continues to follow recession and stays for two or three years.

The outsourcing industry was in despair during 2001 crisis. It managed to get over not before many small firms wiped out in the process. This time this is bigger and robust. The resilience will definitely be high this time again.

Cost Optimization has multiple dimensions. For a financial services company, it might look at back office operation to the lights on IT support. Each of these has multiple dimensions to it. For troubled investment banks, the cost optimization means reducing the staff as well as reduced operation. The market is shrinking leading to less requirement for a large staff. This is a loose-loose market condition.

---End thought on 3/21/2008