Even during challenging times, you can achieve the results you want by taking actions to position your company as a leader for when times are better.
Countrywide. Merrill Lynch. Citigroup. Lehman Brothers. Bear Stearns. There’s no doubt: scores of U.S. companies—especially those involved in originating, bundling, or investing in risky mortgages—have fallen on hard times. But economic challenges can actually help some enterprises grow stronger. The key? Taking action now to position your organization as a leader when the economy recovers.
During the last major downturn in the U.S. (2001 to 2003), many companies turned to offshore outsourcing to lower costs and realize other gains. Most companies focused on staff augmentation, keeping their offshore arrangements relatively simple and allowing them to easily scale up and down.
How will companies change their global services arrangements during this economic downturn? Broadly, there are three steps to weathering and even growing through the economic downturn.
• Step 1: Find Your Business Imperative. What business problems keep you up at night? Clearly, most companies have many. Think about how you would rate the importance of each of the following business needs:
• Reducing costs;
• Lowering internal demand;
• Increasing speed to market; and
• Expanding capacity.
Let’s imagine, for example, that reducing costs is your key business imperative. But how do you accomplish a reduction in costs? Here’s how.
• Step 2: Assess Your Portfolio. If your key business imperative is reducing costs, then your portfolio assessment should focus on the question: Where can I cut costs? This is where services globalization may come in. Begin by analyzing the ease of globalization. Consider:
• Remote operability;
• Skill requirements and availability;
• Business impact;
• Compliance; and
• Risk mitigation.
• Step 3: Take Operational Action. Now that you’ve identified the key imperatives driving your organization and assessed which processes can leverage services globalization to solve those key problems, it’s time for the rubber to meet the road.
Of course, the operational action steps open to you will depend on your key imperative and portfolio assessment. Here are some examples of operational levers that you may use to accomplish your services globalization objectives (I’ve also noted the typical payback period for each lever):
• Increase outsourcing portfolio (short);
• Consolidate vendors (short);
• Rationalize your portfolio (long);
• Renegotiate contracts (short);
• Innovate processes (long);
• Implement continuous improvement programs (medium);
• Consolidate delivery center locations (medium);
• Implement shared services (short);
• Cut excess spending (short);
• Develop (or redevelop) a delivery location strategy (medium);
• Improve governance (short); and
• Engage merger and acquisition or divestiture activities (long).
I wrote last year about the futurized corporation—the company that has leveraged services globalization to a new level. One of its key characteristics is its flexibility; the futurized corporation is capable of taking the operational action steps necessary to adapt to economic cycles.
But a word of caution: globalization can be fraught with challenges. Under pressure to complete a contract and realize cost savings, companies under duress (like those facing an economic downturn) often bypass critical steps.
Globalization requires time to realize a return on investment. So while services globalization can allow companies to weather and even grow through the economic downturn, it still has to be done right. Achieving a return on services globalization requires proactive measures, the right blend of expertise and experience, and a rigorous, tested approach. Yet at the end, companies that can fully realize their return on services globalization will position themselves to emerge from the downturn as stronger, more competitive organizations.