Stan Lepeak, Director, Research, KPMG Advisory

The use and monetization of social media is one of the hottest topics in the market for 2011. Setting aside the dot.com like valuations of firms such as Facebook, Twitter, LinkedIn and Groupon, social media is transforming how consumers, business professionals, business and organizations interact and communicate. Whether aggregating peers for a group discount on spa services or organizing a crowdsourced overthrow of a totalitarian despot, social media has become part of the fabric of how people interact across the globe.

But what about social media’s usage in the more mundane work of global outsourcing?  Will social media play a special role in improving the outsourcing experience or is it just a new addition to the many tools buyers and providers of outsourcing services utilize?

Social media is making inroads into outsourcing at the lower end of the spectrum in terms of scope and buyer size via the concept of crowdsourcing. In this model buyers of outsourcing services contract out to one or more in the “crowd” for various services, typically work related to administrative, creative and marketing, or information technology activities, though the practical ranges of potential services is broad. Open source software such as Linux, for example, is a crowdsourced product.

In some respects crowdsourcing is not new. Firms such as Elance and oDesk have acted as brokers between buyers and sellers of services for years. And crowdsourcing, at least as it is manifested today, it not viable for buyers with larger and more complex service needs. Crowdsourcing global SAP systems management, for example, is not ready for prime time.

Buyers and providers of outsourced services today and increasingly going forward will use social media as a means of communications. It will complement and in some cases supplant traditional forms of interaction, at least for non-critical, sensitive or proprietary communications. This is merely evolutionary, however, not revolutionary.

One way that social media will have an impact on sourcing is through its ability to enable greater interaction and collaboration between buyers with shared sourcing affinities, such as the use of a common service provider or type of sourcing effort. While convening shared affinity groups has always been possible, doing so via the use of social media is more efficient and effective (though typically lighter touch than attending, for example, a conference or joining a regional special interests group).

Service providers need to respond to the growth in buyer usage of social media in a proactive manner. Having a Facebook page touting services is nice, but a quick scan of major providers’ pages show comments that are often irrelevant or occasionally unflattering (whether substantiated or not). The level of negativity is even greater in the world of Twitter tweets. And, as with any public communication mechanism, the requirement to quickly respond to questions, comments and complaints is paramount.

There are also increasing opportunities to outsource various dimensions of social media work itself. Firms are outsourcing everything from the design of a social media strategy (ill-advised) to the posting and monitoring of related activities on social media site and venues. As with any type of outsourcing, buyers must clearly define what activities are best performed by third parties and what should remain internalized.

Overall the impact of social media on the mainstream ITO and BPO markets will remain a “so what” for the foreseeable future. It will become a tool more commonly used by buyers and service providers but will not impact the market the way that other developments such as cloud computing will. This does not mean outsourcing buyers and providers should ignore social media, but rather keep in proper perspective its role in supporting outsourcing efforts. And watch closely those disgruntled user tweets and comments.

Stan Lepeak is Director, Research in KPMG’s Shared Services and Outsourcing Advisory group and former managing director of global research for EquaTerra, which was acquired by KPMG in February of 2011. Lepeak may be reached at slepeak@kpmg.com.

Filed under: Market Trends and News, Outsourcing, Social Media by EquaTerra