This year’s annual Global Services Location Index (GSLI) study by management consultancy firm AT Kearney highlighted some changing trends regarding corporate location strategy.
According to the report, rather than aggressively outsourcing back-office operations, as was popular in the mid-2000s, multinationals are now reassessing their outsourcing strategies and repatriating the use of their own service centres and employees. This is the case particularly in the IT sector, where strategic importance has vastly increased over the past decade with the advancement of digitisation.
“What was once a decision based primarily on cost-effectiveness has now started to incorporate other considerations, for example, whether the function is core to the business and therefore needs to be brought back in house, as well as external regulatory factors impacting business relationships, accountability, and the ability to protect intellectual property and customer privacy,” said Erik Peterson, a co-author of the GSLI report and a partner and managing director of AT Kearney’s Global Business Policy Council (GBPC) think tank.
Other interesting observations made in the report included a possible future of companies using a 'no location' policy. The authors attributed this to greater automation and freelance outsourcers making physical location less relevant.
“Over the past several decades, we’ve gone from a world where organisations that once had just one location now have dozens. In the future, however, as quick and easy deployment makes automation feasible for whole new categories of jobs, we may move to a world of ‘no location',” said Mr Peterson.
Johan Gott, GSLI co-author and GBPC senior manager, indicated that with the rise of 'no location', countries in the low-value-added range may see their attractiveness and opportunities erode. “They’ll need a strategy to aggressively move up the value chain to stay relevant,” he said.
The study, which examined the trajectory of offshoring cost arbitrage to low-cost developing countries and the rise of new locations, made the assumption that there is still ample room for growth.
This year’s GSLI report ranked India, China and Malaysia as the leading offshoring destinations. India maintained and even increased its lead over China. Bangladesh entered the GSLI ranking for the first time, at number 26.
Another key finding in the report was that automation – using robots to perform tasks, for example – is becoming increasingly accessible.