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Supply Chain Risk

CIOs advised to review outsourcing arrangements to mitigate geopolitical risks

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Fears of geopolitical instability may impact the global offshore services market, as sourcing, procurement and vendor management executives review their options to mitigate risk, reports Gartner. 

The analyst firm says the offshore outsourcing market has been relatively stable in recent years, with organisations using a mix of onshore, nearshore and offshore resources with relatively stable demand and supply patterns.  

But recent events like the Sri Lankan terrorist attacks, the US-China trade dispute and political tensions in Hong Kong are raising fears of delivery disruptions. 

“Political and economic stability is an important factor in offshore outsourcing arrangements,” says Jim Longwood, research vice president at Gartner. 

“Gartner has started fielding more questions from clients about how to address these scenarios. This includes whether to stop sourcing services from a particular country, move services to another country or bring them back onshore. Each option is quite costly and can disrupt service delivery in the short-to-medium term.” 

For example, Gartner estimates that China exports around US$10 billion of IT application and business process services, primarily to North America, Western Europe, Asia Pacific and Japan. 

Indian outsourcing firms, meanwhile, generated more than US$45 billion in global services in 2018. 

“How the trade talks progress may hinder China’s ability to deliver IT services,” says Longwood.  

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