Offshoring and Outsourcing Firms in the New Normal and what is in Store for Them?

How the New Normal is Being Shaped and How it Would Impact Global Supply Chains

Much has been spoken and written about how the Covid 19 Outbreak would lead to a rethink on global supply chains as the overreliance on them has proved costly for many firms in sectors ranging from Information Technology to Pharmaceuticals and Manufacturing firms.

Indeed, with suppliers being based in multiple countries worldwide as are the manufacturing facilities, many global firms are feeling the heat from diversification of demand and supply chain value chains.

This is because the Covid 19 Outbreak has disrupted global supply chains and halted shipping and trade across the world.

As a result of this, many firms are struggling to replenish the fast depleting stocks and goods.

Moreover, the New Normal where global travel is limited and the emphasis is on Remote Work and Digitalisation of Value Chains means that outsourcing and offshoring would be redefined through changed business models.

For instance, with Immigration likely to be halted (as is the case in the United States), the Global Nomads or those IT professionals and financial services experts can no longer travel around the world to work or meet with their counterparts worldwide.

Remote Work and Digitalization can be a Boon for IT and Financial Services Firms

Moreover, there are calls for deglobalizing business activities as the Covid 19 Outbreak is being seen as a Body Blow to globalisation since diversified supply chains would now have to be shifted near home.

This is the so-called Near-shoring which many believe would replace Offshoring of business activities.

At the same time, the New Normal due to the Covid 19 Outbreak can be seen as a Blessing in Disguise for many IT and BPO (Business Process Outsourcing) firms as it is now beyond doubt that work can be done remotely and from home as well.

The ease with which these firms have adapted to the WFH or the Work from Home models shows that Western firms can now be convinced to move more work offshore as connectivity and Hi Definition Networks and other Infrastructure make such paradigms easier.

Therefore, there are many experts who believe that despite the Covid 19 Outbreak impacting global supply chains, digitalised work and Remote-shoring would benefit.

On the other hand, the same cannot be said of Pharma firms as theirs are built on a business model that thrives on sourcing of raw materials from multiple countries and hence, some disruption is likely for these firms.

How Indian Firms Stand to Benefit if Western Firms Move Away from China

Having said that, another POV or Point Of View is that Middle Income countries such as India stand to gain from the New Normal as they can attract Western firms seeking to diversify their supply chains away from China.

Indeed, the reason for this is the Very Bad Press that China is getting, especially from the US and more so from President Trump itself, who view it as the cause for the outbreak.

In a tense atmosphere where charges are being traded across the board, uncertainty avoiding Western businesses might be tempted to look for alternatives to China.

In addition, there are concerns that there would be a Second Wave of Infections in China that should worry Western firms and in this context; there have been reports that many Western firms are inquiring about potential opportunities for partnership with firms based in countries such as Chin.

Indeed, some South Korean firms have moved fast and are in the process of finalising such deals. It should be the case that Indian firms and the Indian government should also look to capture some of the business that is likely to move away from China.

The Make in India policy would be handy.

While it is Too Early to Predict, There are both Positive and Negative Trends at Work

Of course, these are early days yet and hence, one has to keep their fingers crossed and not jump to conclusions.

The deep seated and deep rooted nature of the US-China partnership is such that it can easily weather the disruption due to the Covid 19 outbreak.

Moreover, with Millions of Chinese in the US, either to study or work, means that the latter too stands to lose if it forces its firms to exit China.

On the other hand, dealing with such uncertainty as is the case now means that nervous Western businesspersons would definitely be looking for some guidance.

Moreover, with increasing Xenophobia worldwide, global firms would be wary of deploying their expatriate staff in foreign countries and hence, the New Normal might very well mean that this category of professionals would now have to be homebound.

In addition, the New Normal can also lead to a radical overhaul of the BCP or the Business Continuity Planning as many firms have been caught on the wrong foot by the sudden Shutting Down of the Global Economy.

The point here is that one can make contingency plans for a week or two but not for entire months in advance.

Look For Signs amidst Fast Changing Trends

Last, the New Normal is also likely to result in nationalism and protectionism and this is where Offshoring and Outsourcing firms have to be cautious lest they are caught in the Vortex of such emotions.

Indeed, already there is much extremity in views even by otherwise sane commentators and if it continues in the same vein, we might very well see the demise of globalism.

To conclude, we can only speculate about the New Normal and with Trends changing by the Day, it our advice to readers to keep watching for signs of how it is being shaped by events.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.