The early 2016 stock market freefall and whispers of possible recession have companies across all industries looking for ways to bring costs under control.
The S&P 500 is down about 7% so far this year, and almost 40 companies in the index have dropped 50% or more from their 12-month high, according to Market Watch. And if the economy takes a turn for the worse, shares of most S&P 500 companies could fall 50% or more, according to a worst-case scenario analysis presented by RBC Capital Markets.
A number of companies have indicated they will use outsourcing as a strategy to control costs as they navigate 2016’s uncertain financial future. Morgan Stanley recently revealed a $1 billion cost-cutting plan that will leverage a significant amount of back-office operations outsourcing.
“We have too many employees based in high-costs centers doing work that can sensibly be done in lower cost centers,” said Morgan Stanley Chief Executive James Gorman in a fourth-quarter call with analysts.
In a similar vein, Wal-Mart has indicated it will be sending more of its information technology business to its outsourcing facilities and partners in India.
Outsourcing advisors recently interviewed by Nearshore Americas said they expect more companies to ramp up their outsourcing activities, particularly after having learned some tough lessons from the Great Recession of 2008. Organizations are more accepting of offshore outsourcing solutions, and have experience under their belt that will make it easier to choose outsourcing as an option.
“The stars are somewhat aligned as far as outsourcing being here to stay, said Aaron M. Oser, Partner and leader of global sourcing at Pillsbury Winthrop Shaw Pittman LLP, in an interview with Nearshore Americas.