Back in December 2019, the outsourcing industry was worth a whopping $92.5 billion. Four months later, and everything changes as the COVID-19 virus runs rampant and turns the global economy upside-down.
According to the latest outsourcing statistics 68% of American companies providing consumer products are using some form of outsourcing. The main reason behind this is that manufacturing products in another country, for instance, is a lot more affordable than doing so back home.
Consequently, India, China, and Malaysia are the three biggest outsourcing countries in the world. Likewise, manufacturing, software & IT services, as well as research & development are the most common industries that are being outsourced.
However, COVID-19 is about to change all of this.
At the moment, a lot of companies are panicking due to them not being ready for something like this. For example, the Chinese company, Foxconn, closed its biggest factory at the end of March as it was impossible to operate under those circumstances. For those who did not know, Foxconn is the primary producer of the all-American product — the iPhone.
Americans are expecting the new iPhone 12, but they’ll most likely have to wait a little longer. The world is in total lockdown, and most countries have some form of curfew.
So, what can companies do to adapt to these new changes?
Working from Home
For one, some industries have the option of allowing employees to stay at home and work remotely, whereas others cannot. For instance, in the case of manufacturing, this is nigh impossible. Still, companies that have people working on computers urged their employees to stay at home and work from there. Work from home statistics have already reported big revenues even before the pandemic.
The main problem here, however, is that people working in developing countries lack proper equipment — modern laptops with a 10 Gbps broadband, for example.
Countries with better internet coverage showed better results with this option. Namely, most Balkan countries have more than 90% internet coverage on their territories, and people there work for far less than the average American. Their jobs were secure, but for those working in India, for example, not so much.
Relocating to Other Countries
Many companies had no choice but to look for alternatives in other countries. When China saw the first wave of the virus, and people were locked inside their homes, unable to go to work, companies simply moved to South Korea instead. Yet, the problem was, Korea didn’t really stay safe either.
India, one of the biggest outsourcing countries in the world, is holding firm in the battle against COVID-19 thus far, yet the authorities are expecting the peak to hit them somewhere during May. For the fragile healthcare system of this country, this might be a total disaster. The country has some 1.3 billion people, with millions being employed as remote workers for foreign companies.
So far, these companies had no major issues, yet the government recently announced a curfew in the country. Some of them will definitely have to relocate. But, finding such a large number of people who are capable of speaking fluent English won’t be easy. India was a British colony for a long time, and as a result, its citizens are fairly proficient in English. Moving to neighboring Pakistan or Bangladesh is not going to offer the same results.
Artificial Intelligence Opportunities
One of the best possible solutions is taking the next logical (and technological) step forward — in other words, AI.
AI was expected to replace some industries altogether, especially in the US. Nevertheless, this was not “scheduled” to happen before the turn of the decade. Hence, it would seem that things are moving a bit faster than anticipated as companies that were planning on switching to this new technology, were forced into it now.
The Australian company, Telstra, planned to entrust ⅔ of their workload to AI solutions by the end of the decade, yet their officials announced that they were doing it now because they had no other choice. Other companies have also followed suit.
Artificial intelligence is undoubtedly going to take over a whole range of jobs in the near future. Some 800 million jobs are affected by it. Still, this was supposed to happen gradually over time, and it was supposed to allow people to retrain and find new jobs in a timely manner.
Looking from the companies’ perspective, AI is the best thing that happened to the industry. Many a business will benefit from it. Healthcare, marketing, manufacturing, customer service, e-commerce, there’s almost no business in the world that won’t be affected by it in some way.
Currently, if outsourcing is not an option, AI seems to be the next best thing. Sure, companies will need to invest a lot more into their new infrastructure, but the benefits will greatly outweigh the risks. Robots don’t ask for higher wages, don’t need rest and lunch breaks, their shift never ends, and they never complain about their bosses. An AI worker is the perfect employee every manager would like to have on their team.
On top of that, AI-driven software is capable of finishing repetitive and monotonous tasks thousands of times faster than humans ever could with maximum precision and accuracy.
Looking at the points mentioned above, some might think that this may very well be the end of outsourcing as we know it. Well, it’s not! The crisis will pass, and things will go back to normal. Yes, some outsourcing companies will suffer tremendous losses due to these changes, whereas others will be left with just a scratch.
Some manufacturing processes can’t be robotized entirely, and as large corporations depend mostly on affordable solutions, they will always be on the lookout for affordable workers. On the other hand, the few jobs that can be replaced by AI-driven software, most probably will be.
The threat of the ongoing corona virus pandemic is not something that will simply disappear overnight. Everyone’s aware of this, and companies will most likely try to find a permanent solution in the case a second wave hits, or a new outbreak happens. Either way, we’re living in unpredictable times, and no one can say for sure how things will play out in the days, weeks, and months ahead.