Near-Sourcing For IT Is Gaining Momentum

Consumers demands are changing. Today, people expect more and more from the companies we do business with. This trend is largely attributed to advancements in technology designed to meet our every need, making us accustomed to an unprecedented level of customer service. To meet high standards, companies must invest in top-notch customer and IT services that ensure smooth internal operations and the security of consumers’ personal data.

Despite the importance of these services, companies balk at the expense. IT services alone average 3.3% of budget, with spending  in some industries as high as 7.2%, which is why corporations have resorted to outsourcing to countries where operational costs are lower. But offshoring means companies sacrifice quality service. When a business is separated from its IT or customer service functions by thousands of miles and different time zones, support can be unreliable and inconsistent, which negatively affects consumer brand satisfaction and loyalty.

Near-sourcing, defined as outsourcing services locally or where the end product is sold, enables organizations of all sizes to focus on their core business, rather than focusing on managing non-core activities. This can reduce a business’ labor and operational costs, increase efficiency and overall competitiveness.

In fact, near-sourcing has become so attractive that since 2011, Mumbai-based Aegis Communications has been hiring workers in North America to serve its US-based corporate clients (a decision partially motivated by the rising wages in India). That trend has accelerated in the last few years, driven as much by political developments, as by economics. Nothing kills consumer loyalty faster than a bad customer service experience. This move also establishes cultural alignment with consumers, as on a support call customers must be able to easily communicate and identify with company representatives and leave the conversation feeling satisfied with the support received.

How is near-sourcing non-core functions like customer and IT services savvier than hiring an in-house team or outsourcing to offshore partners?

Companies that near-source don’t have to worry about overhead costs like wages, employee benefits or the expensive process of hiring and training full-time staff. This is a huge financial relief for small businesses and corporations alike, considering that replacing an employee typically can cost up to 50% of salary for an entry-level employee.

I’ve seen these benefits first-hand. My organization, Workforce Opportunity Services (WOS), works with businesses nationwide to fill their talent needs, quickly and efficiently. Rather than exhaust their own resources to train employees, which requires diverting energy from their core business operations, they partner with us to recruit candidates from underserved communities for tailored training programs that meet their immediate needs. Most importantly, we’ve seen a lower attrition among WOS program participants, meaning they end up staying with their employer longer than traditional hires.

To be sure, companies could outsource managed services internationally, but wages in India, for instance, are actually on the rise, and the level of customer service from offshore partners simply can’t compete with the high quality near-sourcing provides.

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When a company experiences a system-wide failure, immediate access to its outsourced vendor is key to surviving the disruption. If a company relies on offshore services, there is a delay between problem identification and resolution. By near-sourcing, companies can alleviate the challenges time zones and language barriers pose, and have access to assistance when they need it.

Companies that near-source are not as affected by international politics as those outsourcing to offshore vendors. For example, the current uncertainty surrounding international partnerships, such as the US’s withdrawal from the Trans-Pacific Partnership agreement, has lead U.S. companies to repatriate tech outsourcing. It’s not only a smart business decision but also one that invests in the country’s economy by bringing skilled jobs to the US.

By investing in near-sourced services, companies ranging from small business to major corporations can affordably optimize their internal operations and provide unparalleled service to an increasingly demanding consumer base. When weighed against the resources required to build an in-house team and the sacrifice of quality and stability in offshore services, the value-add of near-sourcing provides is unmatched.

A version of this article was originally published on wforce.org.

Dr. Arthur Langer is director of the Center for Technology Management at Columbia University and chairman and founder of Workforce Opportunity Services (WOS), a nonprofit with a mission of developing the skills of untapped talent from underserved and veteran communities through partnerships with organizations dedicated to diversifying their workforce. Since its inception in 2005, WOS has served 3,800+ individuals through partnerships with more than 65 corporations in 60+ locations worldwide. For more information, please visit www.wforce.org.

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