2009: Racing to subsidies

Last time, I noted a trend for 2009 in relation to increased government activity in the sourcing industry. As we observe government reactions to outsourcing in this time of severe economic stress, two key issues seem to be repeated.

For countries/regions where there are many buyers of services, there is government rhetoric regarding "buy local". That rhetoric is, however, generally balanced with the recognition that there has to be a "local" option that is viable in terms of the 3C's I've mentioned before: cost, capacity and capability.

That need for a viable "local" option, especially in terms of cost, is prompting many governments to increase subsidies to suppliers of services. Those subsidies can take the form of tax cuts and training assistance, through to direct funding of activities but they are never-the-less there. And they can be found in countries like the United States and China--countries that have very different profiles in terms of their participation in the sourcing industry.

While businesses tend to like subsidies as a way to boost their bottom line in times of economic stress, the potential for "buy local" to become an unstoppable political force is creating nervousness.

The outsourcing industry has spent much of this decade building business models that leverage global delivery platforms that shift work to the worker--with service delivery often in different regions/countries than service consumption.

For both buyers and sellers of services, legislative or social forces that support such business models (for example, reduce the cost of offering local services) will be welcomed, whereas forces that constrain such business models will create ever-growing unease.

What will help us get the right balance in each country/region?

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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.