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Why Outsourcing Services Are Immune From Rising Oil Prices?


The worldwide spurt in oil prices has many critics sounding the death knell of the outsourcing services industry, but if we properly analyze the situation, we can easily see that most of these claims are unfounded. Rising oil prices have certainly increased operating costs in developing countries such as India that are major outsourcing hubs, but what is also true is that the increase is limited mostly to the manufacturing sector. The nature of outsourcing services is such that the only major requirements are human resources and IT and Telecommunications systems, prices of which have remained relatively more stable ever since global oil prices crossed the $100 per barrel mark.

Outsourcing hubs located in developing countries such as India have thus been able to maintain the desired cost competencies, which is the main concern. Experts have predicted that oil prices will continue moving northwards in the coming years, but even then the overall affect will be relatively less in case of the outsourcing services industry. Outsourcing firms will benefit from prolonged immunity also because most of them are continuously moving up the value chain by making new offerings such as business transformation outsourcing and business process reengineering. All of this bodes well for the future of the outsourcing services industry.

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