As more and more functions are outsourced, integrating and managing a portfolio of service providers is becoming more difficult — and is causing significant service disruptions in many organisations. In response, segments of the outsourcing industry have been moving from single process (ex: help desk services) providers to full range, multiprocess providers. This means a single outsource provider now offers many possible services or processes within a functional area, like IT. Outsourcing firms have to grow to meet the needs of ever larger outsourcing projects.
Large IT outsourcing deals are on the rise. Most client firms currently use an average of three or more providers. This may lead client firms to reduce the number of outsource providers they use, while providing better integration and communication possibilities a single provider service offers. This will result in a "one-stop" service that can perform a complete BPO, where all of the processes that make up a functional area can be handled by a single, multiprocess provider (Brown, Wilson 2005).
As the outsourcing trend surges on, interestingly, it has also been noted that outsourcing to cut costs no longer provides significant competitive advantage — since all one's competitors are using outsourcing as well and are reaping the same cost advantages. But this is only an indication that the role of outsourcing is becoming indispensable in the turbulent, and intensely competitive business environment of today. Firms that ignore offshoring outsourcing phenomenon may be putting themselves at obvious risk: If they cannot reduce their cost structures more quickly than their competitors, they may be heading for trouble.
(Robinson, Kalakota 2005) The benefits of outsourcing, such as lower costs and the ability to more readily allocate resources to core competencies that create competitive advantages, are understandable. However, issues about outsourcing's long-term consequences have been raised. In the United States and elsewhere, concerns have been raised about the contraction of domestic innovation. The fact that the rate of increase for new patent applications in the IT areas in the U. S. is down by nearly 90 percent is one example of this concern. Increasingly organised responses to the growing use of outsourcing are surfacing.
Some displaced U. S. workers are forming support groups to mount a collective challenge to the use of outsourcing. Outsourcing has also received unprecedented attention from politicians and the press in recent years. Some politicians and journalists have painted outsourcing as an evil to be avoided as economically undesirable to a country's economy. Normally, a distinction is not made between near-shore outsourcing and off-shore outsourcing, also known as off-shoring. The former term refers to outsourcing to a country in on the same continent as the country of origin, for example, a U.
S. company outsourcing to one in Mexico; the latter refers to outsourcing to a country across an ocean, for example, a U. S. company outsourcing to a supplier in India. In common parlance, both have come to be known as off-shore outsourcing. Business managers see offshore outsourcing to lower-wage countries such as India, China, Ireland, and the Philippines in the same light as reducing labour cost by automation or technology. Politicians, the press, and a significant proportion of the general population have however come to view offshoring as a threat to local economies.
These opinions, however, may not affect the actual volumes and trends of outsourcing, which keep on growing. What can affect, though, is untoward government regulation (Rost 2006). Indeed, a major threat to the outsourcing industry arises from governmental legislation. A majority of U. S. states have drafted legislative bills seeking to restrict and even punish companies that outsource off-shore. Some state governments restrict all international outsourcing of jobs to U. S. labour by limiting bidding on state contract to companies with employees operating within the state or national borders.
Members of the U. S. Senate have also introduced the Keep American Jobs at Home Act to eliminate tax deductions for businesses that ship U. S. jobs to foreign countries. U. S firms, however, have been duly responding by seeking to avoid the political backlash by setting up their own development centers (either solely owned or an equity joint venture with a provider) in the same foreign countries. Although there can be tricks to go around it to some extent, legislation can substantially inhibit growth and development in the outsourcing industry (Sood, Robin. 2005). Yet, the offshoring industry has gathered enough momentum that it would be difficult to stop it now.