Pharma industry to drive next IT outsourcing wave

By Kirsty Barnes

- Last updated on GMT

Related tags: Outsourcing, Globalization, Business process outsourcing, President

2008 will be a year for both challenges and opportunities in
outsourcing, according to Indian IT and business process
outsourcing (BPO) services advisory firm Tholons.

The US elections, where the offshoring of jobs is the subject of debate; the weakening of the dollar and sub-prime issues; as well as the appreciation of the rupee; will all pose challenges to the globalisation trend, said Dr Pradeep Mukherji, president of Consulting at Tholons. At the same time, he believes opportunities will present themselves by way of greater acceptance of outsourcing by small and medium enterprises (SMEs), particularly those from Europe who are now gaining confidence in the offshore markets as they have matured; as well as a global labour shortage and the need to improve costs and project turnaround times. "Overall the velocity of outsourcing is likely to be contained",​ he said, adding that the pharmaceutical and healthcare industry is expected to be a "significant contributor"​ to a third wave of outsourcing, with the US market - worth over $4trn - identified as the main driver. "Adoption of services globalization in the ultra conservative pharmaceutical industry will continue to be slow in 2008 but will be on a steep curve as we look towards 2015",​ said Dr Garima Vashistha, president of Tholon's healthcare division. "Healthcare tourism, pharmaceutical research, including clinical trials, revenue cycle management and analytics will lead the globalisation of healthcare processes". ​ The globalisation trend for such services is growing as more and more countries are opening themselves up to the idea, spurred on by the realisation of the need to source globally for multiple reasons. According to Tholons, drivers have shifted from mere cost arbitrage to more strategic fulfilments, such as organic business growth across geographies, as offshore markets are also tending to move towards being mature global markets for large scale business developments. Furthermore, customers are becoming more educated on the business of outsourcing, with globalisation resulting in "informed decision making". ​ Meanwhile, as well as seeking a reduction in time to market, a worldwide shortage of relevant skills and talent has increased pressure across firms to acquire talent globally. "We see clients focusing on cities rather than just countries in their search for a qualified pool",​ said Paul Santos, president of investments at Tholons. "Cities in the Philippines, Russia and Eastern Europe will emerge as preferred destinations for customer service, product engineering and multilingual processes respectively".​ Such popular locations will also play host to new centres of excellence that foster quality over mere cost savings. Looking to the year ahead, Tholons predicts that as the IT, BPO and knowledge process outsourcing (KPO) industries mature, there will be consolidation among the mid-tier service firms, with the larger service firms using mergers and acquisitions (M&A) as a growth strategy. As part of this, European firms will be particularly aggressive in building offshore capabilities and will also be key targets for acquisitions, the firm said. Meanwhile, amongst the service providers, Tholons said that newer business models are emerging, such as "outcome-based"​ pricing, in order to beat competitive market pressures and overall, the offshore advantage is expected to be sustained, according to a report by the firm, titled: Top Ten Trends in Services Globalization - 2008.

Related topics: Markets & Regulations, Data management

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