Technologies such as cloud computing and economic trends such as the recent global recession are pushing more Canadian companies to take a dip in the offshore outsourcing scene.

Already estimated as around $5.5 billion, the overall Canadian IT outsourcing market is expected to grow by as much as 3.8 per cent from 2009 and reach $15 billion this year, according to IDC Canada.

Canadian companies have comparatively less experience in global service delivery compared to U.S. businesses however local financial services firms are leading the charge in the current off shoring trend.

Canada still lags the United States in total outsourcing headcount but with greater pressure on CIOs to cut spending, outsourcing is bound to gain momentum, according to Sebastien Ruest, vice-president, services and technology research at IDC Canada.

“With the chipping away of the traditional outsourcing model, alternative outsourcing models such as remote infrastructure management, cloud and utility computing are expected to grow by 5.4 per cent by 2010,” Ruest said

He said close to 35 per cent of Canadian companies are using off shore services.

Traditional outsourcing vendors may still be the preferred vendors of choice, but they have lost considerable market share to pure play providers, teclos and specialty BPO players, according to a recent outsourcing survey conducted by IDC and the Centre for Outsourcing Research and Education (CORE). According to the study,

Pure Play providers have tripled their share of the market to 6 per cent in the past four years.

The study said many Canadian firms still prefer Western-based outsourcers and such firms are expected to capture 70 per cent of the new off shore work in 2010.

Despite this preference for Western-operated firms, location appears not to be a major issue for Canadian clients. An India-based provider told researchers their customers are “are not very demanding regarding geographic location…they don’t really ask”.

A Canadian advisor said: “Companies are not concerned where the resources it. They are more concerned about the pricing and relationship model.”

Concerns about global outsourcing include:

  • Lack of control over resources
  • Managing across large distances and time zones
  • Privacy and security
  • Accountability
  • Labour turnover
  • Language and communication
  • Quality of work

 

For companies considering off shoring, IDC and CORE has the following recommendations:

  • Off shoring is not an all-or-nothing proposition; take a portfolio approach
  • Be open to new delivery and and pricing models
  • Don’t spend too much time preparing for change
  • Know what your outsourcers is doing
  • Understand, determine and manage potential risks
  • While off shoring introduces certain flexibility, also consider the inflexibilities of the model
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  • Great recommendations from IDC and CORE. It is true that there are major concerns over outsourcing your projects, especially when companies do it in order to cut back on some expenses.

    • Thanks for your comment BPO Manila. I think the IDC and CORE studies can serve as a guide for providers who want to improve their offerings and come up with more targetted services. On the other hand, businesses should be warned not consider outsourcing or offshoring as merely a means to cut cost.

  • Basil

    What about all those here in Canada who can’t find jobs who are highly trained, yet are loosing jobs to outsourcing, look people are not just numbers on a flow chart. If Corporations are making prophets on the backs of the North American workers its one sad world to be sure.

    Call me what you will but 10% of the unemployed can’t buy who really is at fault.

    • Hi Basil,
      As a person who’s been laid off quite a few times, I can relate to the situation you described. You’re right people are not just numbers on a flow chart.
      I think despite the trend towards outsourcing there should be an equal effort by industries in Canada to develop within the country. This way Canada will be able to produce and hold onto tech talent needed for the 21st century.

  • You have listed 7 major concerns about offshoring. Nr. 6 is Language and communication. I totally agree with you, cause customers often complain about lingual and cultural barriers.

    I want to mention Offshoring 2.1 – a remarkable approach to these concerns. With a management of people from the same cultural area and the application of modern communication technologies, customers don’t have to experience misunderstandings. Instead of complaining, they become an important part of the project team.

    Thanks Nestor!