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In outsourcing, both department stores and boutiques have a role

"Far better to specialise in business areas where you excel, particularly emerging ones like mobile apps, where you can ride the crest of the wave – and develop them as your brand"


Manish Khandelwal and Huw Watkins, PA Sourcing experts

Manish Khandelwal and Huw Watkins

4 February 2013

India’s comprehensive range of capabilities, and its ability to support large projects, makes it the ‘department store’ of outsourcing, particularly for IT services. However, our conversations with sellers and buyers of outsourcing services tell us that ‘boutiques’– regions that specialise in a particular business area – are gaining ground.

For example, the Philippines is becoming known for customer-facing voice services, while China is establishing itself in animation, alongside traditional disciplines like manufacturing and IT. Ireland runs shared service centres, Poland is associated with accounting, and so on.

As well as differing business specialisations, there are also cultural and linguistic differences that suit providers in a particular region to a particular geographical market. For example, China’s outsourcing industry gets the majority of its business from its domestic market, or from Japan.  Poland does business mostly with other parts of Europe, while Canada serves the United States. And of course India does a huge amount of outsourcing business with the US and UK. This ‘satellite sourcing’ arises from cultural, as well as linguistic, alignment – something that really counts in areas like customer service, where countries like South Africa are attempting to capitalise.

What’s the message here for the locations, and for the organisations choosing between them? Anyone marketing a location should understand that it’s not possible to be all things to all customers, especially if it means competing in a market that’s already sewn up, for example taking on India at application development projects needing a cast of thousands. Far better to specialise in business areas where you excel, particularly emerging ones like mobile apps, where you can ride the crest of the wave – and develop them as your brand.

Choosing your specialist area is mainly about critical mass. Whether it’s gaming, voice processing or mobile apps – canny regions are identifying specialisations where there’s enough activity to attract and sustain a viable labour force. Without that critical mass, growth and long-term sustainability will be limited. Once you have critical mass, you’ll attract more specialists, so there’s a virtuous circle.

It also pays to consider geographical markets. Pick one that is culturally close and that believes in you – American companies, for example, have been happy to be among the first to work with providers in the Philippines.

For the buyer of outsourcing services, it’s important to work out which regions are best suited to your needs, you want to go where it will be easy to find the right resources. Even for conventional outsourcing, location is still worth considering. And remember, in this hyperactive marketplace what was true 18 months ago may not be true today.

One thing is certain though. While departmental stores may capture the most business, boutiques exist for a reason, and will continue to do so.

Manish Khandelwal and Huw Watkins are sourcing experts at PA Consulting Group

To visit PA's pages on shared services and outsoucing, please click here.

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