Outsourcing drivers: times are a-changing

date: 9 April 2014
reading time: 2 min

The recession focused business minds on cost reduction. Now we are ‘in recovery’ with economic forecasts appearing healthy, businesses can look beyond this. So can outsourcing. 

The recession focused business minds on cost reduction. Now we are ‘in recovery’ with economic forecasts appearing healthy, businesses can look beyond this. So can outsourcing.

During the recession it was all about cost savings, and the biggest factor in choosing a supplier was too often price.  Fortunately, organisations are now looking beyond this. Research from MooD published in March, revealed that 65 percent of end user organisations cite cost reduction as the original business motivation for outsourcing, but have since found most value from their suppliers comes from different (i.e. not cost saving) areas. In fact, 25 percent of end-user organisations say business transformation is the most critical area where suppliers are being used, whereas cost reduction is only stated by 17 percent.

Business transformation, as cited by a quarter of respondents as the most valuable benefit of outsourcing, is a company-wide phenomenon. It is not constrained by borders or departments and therefore neither should suppliers be. For example, in a global business, marketing activity in the UK could affect software development outsourced to Poland. If the Polish software development partner has not been informed of the expected development requirements for new website pages and a customer app, they would not have been able to call on extra staff and therefore deliver the quality software in a timely manner. However in a business that is joined up in the right way, this campaign would have been communicated with the software development supplier so that they could scale up resource to meet the demand.

It seems that the key to success for all outsourcing relationships that go beyond cost saving is transparent communication between client and supplier. By clearly showing what is happening at any time, the customer is empowering its supplier to deliver the best service and vice versa – the outsourcer is enabling the customer to refocus, in order to get the best possible outcome.

I think that everyone agrees – the move away from pure cost-savings as both: a reason to outsource and the main benefit from the outsourced work, is a good thing. However on its own it is not enough: projects can still fail. For outsourced relationships to really succeed, a non-siloed approach combined with clear communication on both sides is a must.

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