The sub-prime mortgage fiasco and subsequent global financial meltdown have left many organizations scrambling amidst budget cuts, layoffs and corporate reorganizations. When it comes to IT, the recession is suddenly making outsourcing CRM and other functions more attractive options, according to analysts.
'If anything [the recession is] increasing the focus on spend,' said Phil Fersht, research director, global business services and outsourcing with Boston-based AMR Research Inc. 'Companies aren't going to be spending more money on IT and services. They're trying to get more with less, and that means exploring avenues that take advantage of lower-cost delivery. There will be more demand for outsourcing services that have immediate cost impacts on the business and not a heavy initial investment.'
Before the economic meltdown, outsourcing was already on a strong growth path. Gartner Inc. is still predicting 60% growth in offshore IT outsourcing in the U.S. in 2009 and 40% growth in Europe. In addition, The Hackett Group, a Miami-based consulting firm, is predicting that a quarter of IT jobs at Global 1000 companies may be moved offshore by 2010.
The financial crisis has proven a boon for at least one outsourcer. Cincinnati-based Convergys Corp. recently signed a new five-year agreement to provide customer support to the Federal Deposit Insurance Corporation. The contract stemmed in part to a significant increase in calls to (877) ASK-FDIC by consumers concerned with developments in the banking industry, according to Convergys.
CRM outsourcing in particular is not expected to see a huge increase in interest, however, partly because organizations have been using business process outsourcing with contact centers for years, and there's less room for growth. Also, with application outsourcing, CIOs and CTOs are not necessarily shopping for CRM service providers specifically but instead are looking for broad support of business applications of which CRM is a part, according to Dana Stiffler, research director with AMR.
'Companies are looking at outsourcing a bigger chunk of their operation, like the infrastructure operation,' Stiffler said. 'You could probably be pretty opportunistic about CRM, especially with offshore service providers that would be happy to take you up on something as narrow as sales reporting or analytics.'
In fact, that is just what the Serene Corporation is doing. The Santa Clara, Calif.-based systems integrator and consulting firm recently opened an offshore development center in Pune, India.
CV Therapeutics, a Palo Alto, Calif.-based biopharmaceutical company, has been using Serene to run its Siebel sales and marketing reports for a little more than a year.
'Our strategy for information management is outsourcing the day-to-day, repetitive operational tasks so we can free up internal resources to do project management and business analytics,' said Dave Kuo, CV's senior director of information management.
Kuo has fewer than 30 people on his IT staff, so human resources are precious. Serene runs reports for Kuo on CV's Siebel 7.7 system so its sales department has better insight into how doctors are prescribing the company's drugs on a weekly basis. Serene also takes out the data that Sales enters into Siebel -- such as which doctors were contacted, and how many -- and pushes them into CV's data mart.
The weak economy hasn't affected CV's outsourcing plans, though. Rather, the company identified strategic outsourcing as an option early on and has no plans to change.