Is Canada Failing to Grasp the Full Value of Outsourcing?

Canada’s outsourcing environment is unique, and facing a host of challenges and opportunities coming into 2015. This is a market with slow uptake in large industries such as healthcare and the public sector, but which nonetheless has embraced outsourcing in key areas such as telecommunications and finance. In all areas the cloud is making inroads, with Canada’s Centre for Outsourcing Research and Education (CORE) estimating that outsourcing contracts containing cloud components or elements will grow to 50% by 2017 – a huge leap from the 10% in 2010. However, not everyone shares that rosy view.

“I think 50% is a very aggressive number,” says Bernie Gillies, Executive Advisor, Info-Tech Research Group in London, Ontario. “There is tremendous pressure on IT teams to leverage cloud to reduce their costs; however, companies will continue to adopt cloud for their low risk, cloud suitable applications.”

Other IT analysts, notably IDC Canada, have noted that healthcare is an area where Canada lags in outsourcing, and in embracing cloud-based solutions. The reasons are simple enough: this is a highly regulated environment, with both privacy and data residency concerns. Canada’s financial services sector is also perhaps more conservative than its European and American counterparts, but other industries such as media and retail are more than willing to outsource BPM services.

“In Canada, there is a perception by business that there are cost savings opportunities with outsourcing,” says Gillies. “Their industry peers have outsourced, and there is often dissatisfaction with the performance of the internal team.”

One driver is the lack of internal IT skills – and a market where those resources are expensive to find, hire, and train. Large Canadian outsourcers tend to set up shop in rural eastern Ontario and the Maritime Provinces, where it is easier to source affordable labor in both English and French. For English-only customer service, Jamaica is a popular location.

However, serving the French-speaking market of six million can be a challenge. When it comes to French-language support, the French Caribbean islands have been bypassed due to the unfamiliar accents, low English proficiency, and poor infrastructure. That leaves Quebec – where some French resources cannot default to English – and parts of Ontario, Manitoba, and New Brunswick, where bilingual resources can be easier to find.

“A Canadian provider needs to scale up and down,” says Gillies. “Their customers need to know that they have access to excess capacity.”

Storm Clouds in 2015?

Though the Canadian economy and banking system are strong, the recent plunge in oil prices has hit the dollar hard, and the Canadian consumer has remained cautious. In retail, that lesson has been learned hard by Target, which continues to struggle, with home-grown retailer Canadian Tire leveraging internal and external resources to embrace CRM technology, particularly on the mobile front.

“The Canadian market is rapidly changing as a result of emerging technologies,” says Bala Pandalangat, president and CEO of Canada’s Centre for Outsourcing Research and Education (CORE). “But people need to do their due diligence. They need to partner with the right suppliers, to be clear on their business goals, on their objectives, and how technology will play a role in delivering.”

That advice applies equally to Canada’s outsourcing community as to the buyers themselves. One trend of note is that Canadian outsourcers are becoming impatient, and more aggressive in their marketing. They feel they have the solutions in place to help Canadian companies, many of whom lag behind the United States when it comes to the adoption of new technologies and processes, and who are feeling nervous going into 2015.

“We are seeing more unsolicited vendor presentations,” says Gillies from Info-Tech. “Canadian outsourcers are targeting those companies with a large Internet presence, and with remote offices and international need.”

It only makes sense that a Canadian supplier would want to nab a client before arriving on the radar of large international consultancies, but global tends such as big data, social media, mobility, analytics, and the cloud do not necessarily require a Canadian presence. This year, CORE’s national conference, which was attended by 250 people, outlined the risks faced by those Canadian outsourcers who might be falling behind the curve.

“In some respects the CORE conference highlighted that Canadian organizations are still lagging a bit, relative to international counterparts,” says Pandalangat. “This is partly due to the regulatory environment, and sensitivity to risk and effective risk management.”

Canada’s Outsourcing Practise

One bright spot is that Canadian organizations are taking a leading-edge approach to socially responsible outsourcing practices, such as a supplier code of conduct. Many are also getting behind emerging trends, and taking strides in embracing new sourcing and partnering practices, including in the public sector, often seen as a laggard.

“We heard from the Government of British Columbia, which commented on the need to be able to deliver more, and to utilize emerging technologies through strategic partnerships,” says Pandalangat. “This should help the Government to keep pace with growing costs and the demands of its citizens.”

Pandalangat says that CORE is increasingly seeing other verticals in Canada gearing up on their governance and relationship management initiatives, because managing risk in all forms is gaining focus.

“We live in a world where consumers have the expectation of perfection,” he says. “And end-to-end organizations are going to have to deliver experiences and services that exceed those expectations.”

In that context, for Canadian organizations big data is as much an opportunity as a threat, with cloud offerings able to deliver cost-effective analytics to distributed environments with a degree of flexibility – something that is hard for many in-house operations to achieve.

“Those Canadian businesses that have made use of big data in the past are prepared to leverage anything that will reduce their costs, that is secure, and that meets the expected level of service,” says Gillies. “And the others? They still don’t know what questions to ask.”

This suggests that outsourcers have a key role to play in educating the Canadian market. During the CORE conference, for example, Donald Rippert, General Manager of Cloud Strategy at IBM, advised on how to determine best practices in adopting and managing a hybrid cloud IT environment. And Chris Surdak, an information analyst at HP, spoke of how the tidal wave of data coming our way can either overwhelm a business oropen a realm of new opportunities.

But in both examples, the message was the same: do your homework. Outsourcers can advise, but an organization really needs to investigate how the various offerings on the market can get the job done. And so far, it would seem that many Canadian businesses still have their work cut out for them.

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