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Clients increasingly disappointed with outsourcing partners: Forrester

Traditional outsourcing firms, such as Infosys and TCS, may need to pay attention to the ‘depth’ of their professionals as companies are increasingly disappointed with outsourcing partners and are mulling going back to captive centres, according to a report.

According to a report on the ‘re-emergence’ of the captive center by Forrester Research, more and more of the work currently directed to outsourcing companies may be re-routed to fully-owned centres of companies.

“Based on feedback from many of the 30 vendors that Forrester interviewed, these new models of engagement could represent as much as 15% to 20% of the future total work that is currently outsourced to offshore vendors,” Forrester said in its latest research released today.

Forrester’s research report is based on the talks it had with Sourcing and Vendor Management Professionals — the executives at various companies who decide whether to go for outsourcing or simple offshoring.

In outsourcing, the work is handed to a partner like Infosys or TCS, which then deploys a dedicated team to work with the company to solve its problems, increase business and profitability etc.. In the offshoring model, work is given to a special centre established by the company at a low cost destination. Unlike in the former model, offshore employees are on the company’s rolls.

Many companies moved from offshoring to outsourcing over the last ten years due to difficulties in managing their offshore centres. Big outsourcing companies like Genpact and Infosys, on the other hand, were able to better withstand competitive pressures because of their size.

Forrester, however, says companies are increasingly disappointed by the quality of work given by outsourcing partners. Though they promise ‘transformational engagements’ and business consulting, many companies find the knowledge of outsourcing professionals lacking as they cater to several companies and sectors.

“Customers complain that offshore vendors have stretched themselves too thin, particularly by covering too many verticals. The breadth of their offerings results in a lack of depth in business expertise, which is still not deep enough to advise their clients on specific industry challenges.

“Because the vendor’s onshore leadership teams aren’t trusted advisors, customers won’t reveal their key strategies and initiatives to them. This leads to a continuous cycle that feeds on itself: lack of investments in the relationship result in misaligned expectations, an inability to meet delivery expectations, and eventual mistrust,” it warned.

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