Outsourcing Has Evolved - Has Your Business?

The evolution of outsourcing is fascinating because it has evolved so quickly. Treated initially with some suspicion and largely considered to be a procurement exercise, outsourcing has matured into an important business strategy and most modern companies will work with suppliers to buy in their expertise. But have our attitudes changed?

To many managers, outsourcing is still a subject they avoid. Many have memories of failed projects or comparing suppliers and asking them to all compete over the price. Some aspects of procurement don’t seem at all strategic, but outsourcing has matured right?

According to PA Consulting data, it has. 64% of managers are using outsourcing as a way of driving business transformation – so the introduction of a partner allows them the opportunity to redefine how they do business. 35% of companies that are already outsourcing IT functions are planning to increase the work they give to their IT partner.

But the same study also finds that 69% of managers are using outsourcing to reduce costs. So is it still all about cost reduction or business transformation?

The reality is that working with a partner can now be both. Accenture has argued that we are moving to a business environment they call a “corporate marketplace” where many companies have relationships with many others – there is more of a value web rather than a value chain. This will also include on-demand work platforms, such as UpWork, where experts can be called on for very specific tasks for a short period of time.

It’s clear that outsourcing as a term is becoming dated. The corporate marketplace doesn’t sound much better in my view, but it is clear that companies will be employing a more fluid relationship with employees, individual subject matter experts, and suppliers with specific expertise in future.

Largely this is because of the service complexity. Look at customer service as a classic example of what has changed. A few years back a consultant would analyse your customer interactions and then lift and drop your entire contact centre from your business into a service company – possibly located thousands of kilometres away.

The ambition was largely to save on operating expense and to encourage suppliers to make capital expenditure (basic infrastructure required to deliver the service) in return for a long-term contract.

This approach seems quaint today. Look around at the fast-moving customer service environment and you will see that suppliers today need expertise in Robotic Process Automation, Artificial Intelligence, multiple service channels including social, emerging channels such as smart speakers, and an ability to analyse vast amounts of data in real-time.

None of this implies that a lift and drop solution to the other side of the world would be a satisfactory solution. The supplier today needs to offer deep expertise and an ability to help the client transform their business using the available technologies. They also need to be able to advise on the future – which trends might shape how the client does business next year?

Combine the supplier taking on this role as expert advisor with the more common use of individual subject matter experts and outsourcing looks completely different to how it was 10-15 years ago. It’s time for the business media and managers in general to change their views – for outsourcing in 2019 read partnership and transformation.