A well-known international company here in Makati has required all their employees to take exams. If an employee fails that will give the firm reason to lay off that employee. Some clients of outsourcing companies have terminated or not renewed their contracts.

If companies are bankrupt or don’t have the budget , then for certain, even if the outsourced service is cheap, they will discontinue it.  If companies are cutting costs but still have the budget (and of course are not bankrupt), then they might have to consider outsourcing. 

Outsourcing is just one option of trimming the fat from the budget.  Laying-off is the cheapest and quicket way to cut costs.  Salary cuts are also a quick easy fix.  Having a one person do multiple tasks that had been done by several people before at even a lower salary  is another way to save money.  These  are propositions  accepted by US and European employees  due to the dearth of options.  For outsourcing to be a viable option, it  has to be significantly cheaper and has to produce, right away, with a fast and cost-effective transition. 

 The fraud perpetrated by Satyam, India’s 4th largest outsourcing company, when it inflated their earnings report,  will in near-term cause an operational and contractual mess that will affect other outsourcing companies but I believe, it will not affect the viability of the outsourcing business model.  The differences in foreign exchange rate and coutry cost of living coupled with the accelerating technology is an economic reality  companies cannot ignore.  Some good may come out of the  Satyam fiasco.  This incident  tells governments to exercise better controls and put more effort in the outsourcing industry. 

In this growing globalized landscape, with cost cutting foremost on the agenda because of the financial crisis, there are more, new, different opportunities for outsourcing companies. But in this increasingly competitive economy, outsourcing companies also have to be on the look -out for new markets and new services to offer.  Medical transcription, affliate marketing and knowledge-based outsourcing are just some new trends to emerge. Government support should be palpable.  Training for professionals in the industry should be intensive.  Information and communications technology should be continuously developed and improved.

There are a lot of “ifs”, “buts” and “to-dos” for the outsorucing industry especially in this financial crisis.  But I believe this is not something the industry cannot overcome.