Is a giant awakening?

If we analyse the global sourcing market on a geographic basis, one key trend stands out significantly, as shown in the diagram below.



Japan is clearly under-represented in terms of the size of its outsourcing market relative to the size of its economy.

The question that this raises is does the above data represent a permanent difference in the market in Japan (and to a lesser degree France) relative to other countries or is it a transient difference that results from differences in adoption rates and timing.

Clearly there is no definitive answer to this question at this stage, only time will tell us what the real answer is but we can consider some indicators of potential trends.

Historically, in countries such as the US, UK and even Germany, the rate of adoption of sourcing as one of a set of solutions to business challenges has been greater in times of change. Clearly the Japanese economy is undergoing some significant change and growth now after many years of being relatively stagnant. This would suggest a possible increase in the use of sourcing in Japan.

Talking with a number of organisations, both clients and service providers, there is anecdotal evidence of an increased level of interest in and use of sourcing in the appropriate context in Japan. In this case, much like the Australian context historically and the burgeoning use in Europe, access to skills rather than shifting of people is a key driver.

This creates both challenges and opportunities for service providers. Those who can provide those additional resources, for example larger Indian firms as well as multi-national firms, would seem well placed if they can direct their sales and marketing efforts in this direction. How the Japanese service providers are able to provide these additional resources is more of an open question. Many are making significant efforts to increase their pool of resources including providing global delivery solutions for their clients and those that execute that strategy well should also be well placed.

Add to that, the reasonably large number of previously established outsourcing contracts that are coming up for renewal in the next 2 years and this all suggests a changing market, undoubtedly creating shifting market positions for many service providers.

The next couple of years should be quite interesting and when we look back at them, we should have a clearer answer to the question of whether the giant is awakening.

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Michael Rehkopf

Michael has more than 20 years of experience in operations, strategy and sourcing covering all major parts of the globe. He has also worked for Australian, Canadian, German and Japanese companies in both business process outsourcing and IT outsourcing.
Michael's industry experience includes the financial services, manufacturing, telecommunications and travel sectors. He leverages this diverse industry experience and his university background in accounting, IT and his Master of Dispute Resolution, to assist clients in the development of business strategies and the implementation of sourcing strategies. These include the associated evaluation, negotiation and organizational change.
Michael is currently a partner at TPI, the world's oldest and largest sourcing advisory firm. Prior to joining TPI, Michael held leadership positions with Siemens Business Services, OpenPlus International, Mitsubishi Electric and Netron.