Outsourcing over there is here to stay

Tuesday June 14, 2005 The Guardian

Outsourcing is all around us, from database management to dry cleaning.

a £2bn agreement, which will run until 2015. The deal encompbuttes the corporation's broadcasting technology, channel streams, programme archives and hardware components such as PCs.

The world's leading news agency, Reuters, recently announced that it was expanding its journalist roster in Bangalore. Reuters' global managing director, David Schlesinger, says subscribers will not notice where a story is drafted. This suggests that outsourcing changes will not only take place in back-office areas, such as IT, but at ground level too.

Business 2.0, a Time Warner magazine featuring technology and business news, conducted an experiment to determine the effectiveness of outsourcing by offshoring a section of the publication to India. The project cut costs by 50%.

What's more, the famous Grey Lady of journalism, the New York Times, has outsourced a variety of elements to a software company, which contracts its work to India.

Add IT and back-office processing at the major cable networks and it is hard to identify a medium not outsourcing at some tactical level. It has even been suggested that press office functions such as research and drafting press releases are open to offshoring, while the strategic client relationships are better supported onshore. This blending of resourcing aligns business imperatives with cost-cutting.

The primary reason for this surge in outsourcing is to reduce overheads. It has been said that the BBC will save between £20m and £30m a year, allowing the corporation to relocate resources to key areas such as new programming.

The traditional business models of the media industry are under severe pressure: revenues are being squeezed by a rising cost base, increased compebreastion and changing advertising models.

A second key factor is the convergence of broadcast and IT technology and the addition of supplementary channels such as mobile. As broadcasters move towards greater digital output, more and more companies are realising the strategic benefits of outsourcing. Some outsourcing companies have extensive experience in IP technology convergence, content distribution and archive digitisation and the decision to outsource becomes even more logical.

However, outsourcing operations purely to cut costs in the short term rarely reaps any tangible benefit further down the line. It's important to analyse the entire organisation and use this examination to better the business.

While the cost savings on offer can be substantial, effective outsourcing is not just about saving money, but instead about transforming organisations for long-term results.

á Kirk Smith is senior outsourcing strategist at LogicaCMG