The States of Outsourcing

The world of outsourcing has seen interesting bits of news recently—some negative, some positive, and some just downright weird.

By Dirk Olin
On the negativity front, the latest TPI quarterly index found an 18 percent net drop worldwide in outsourcing contracts of $25 million or more compared to the second quarter of 2010. At least some of the causes of this are clear. Chief among them are abysmal market conditions in the United States, where the value of such contracts was fully 50 percent lower than a year before.
The usual litany of outsourcing dissatisfactions can be trucked out here. Practitioners often put so much pressure on providers’ service level agreements (SLAs) that the latter take self-defeating shortcuts. Likewise, as happened even more frequently with many big engagements five or 10 years ago, some providers are so eager for business that they create nearly impossible promise-to-performance ratios. And, of course, some functions for some companies just simply shouldn’t be outsourced or offshored in the first place.
All in all, it’s a reflection of the outsourcing market’s maturity and the hard-won lessons experienced by first and second adopters. But pull apart the TPI metrics, and a more encouraging picture emerges. Compared with the previous second quarter, the second quarter of 2011 saw total contract value (TCV) up 13 percent for Europe, the Middle East & Africa (EMEA), and 55 percent for the Asia Pacific (APAC) region. Concludes TPI’s chief research officer, Paul Reynolds: “Despite weakness in the big picture for the quarter and at the half, we anticipate stepped-up second-half activity that will find the market finishing the year at or near typical levels.”
Granted, this prediction preceded the sociopolitical tomain poisoning that was the congressional debt ceiling debate—not to mention the subsequent stock market nausea. And, no, the European community has not yet found a satisfying formula for dealing with its vertiginous market mix.

But that doesn’t change the fact that outsourcing is increasingly finding adherents in Europe (and in France and Germany, not just the United Kingdom or Benelux or the Nordics.) What’s more, its prospects for growth in emerging markets have never seemed stronger.
Which brings us to this month’s installment from News of the Weird.
In early August, Joseph Hennessey of Beins, Goldberg & Hennessey in Chevy Chase, MD, filed a class action lawsuit in the U.S. District Court for the District of Columbia alleging that Bank of America Corp. has been violating the Constitution by (wait for it) outsourcing. The claim is that the bank puts the privacy of its customers’ financial data at the risk of U.S. government surveillance by transferring service calls to overseas call centers.
The complaint notes that service calls to the bank are often routed overseas without any notice to customers. It follows, of course, that customers’ digitized financial records would be sent electronically to the call center as part of this process. Here’s the suit’s wrinkle. When that financial information crosses our border, it loses the protection against U.S. government collection or surveillance that is enjoyed by domestic electronic transfers of the same information.
“By routing plaintiffs’ [financial information] to foreign national personnel residing overseas, Bank of America affects a forfeiture of the Constitutional and statutory rights that constrain the surveillance by the United States Government,” the class alleges. This, charges the complaint, violates the federal Right to Financial Privacy Act and other local consumer protection laws. (The suit seeks $100 per class member for each overseas data transfer along with other damages, including treble damages.) The complaint also asks for Bank of America to stop transferring the data overseas without first getting authorization from customers.
I’m all for transparency, but surely this is a disingenuous assault on the practice of outsourcing, per se. The legal grudge—to the extent that it has any merit at all—would seem to be held against the agency of privacy invasion (i.e., the federal government), not the service provider. In an age of global technological instantaneity, I suppose the Luddites must be allowed their tantrums—though I’ll be surprised if this survives a motion to dismiss.
Oh, and speaking of technological instantaneity, with this issue we launch a new reader service. At the top of certain stories, you can now find a “more on the web” icon that we hope will send you to But take note: We don’t own the server on which our site is hosted. We’ve outsourced that.


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