Hfs: The latest for outsourcing in 2013

Hfs Research is a great place to look for pragmatic analysis of the global sourcing market and their latest annual ‘state of the outsourcing industry’ survey for 2013 has just been published.

The key findings of the new research include:

  • Close to a third of high-end enterprises view Global Business Services as mission-critical
  • Enterprises still very focused on achieving operational results when they outsourcing
  • High-end enterprises focused on cost, mid-market focused on provider solutions
  • Outsourcing performance meeting the table-stakes, but falling short in strategic areas
  • ITO results are are functionally effective, but light on innovation
  • Mid-market clients having the most success transforming processes and achieving innovation with ITO
  • 90% of BPO initiatives highly effective at meeting operation targets; BPO outperforms ITO for cost reduction effectiveness and process standardization
  • Large enterprises getting better performance from BPO than mid-sized enterprises
  • Outsourcing adoption still very nascent for business processes
  • Service Providers main goal is to shift enterprise focus away from cost and towards value
  • Buyers don’t expect innovation from suppliers, they want stability, industry understanding and delivery excellence

My thoughts are that we are seeing a maturing of the outsourcing market. As mentioned, many companies now see global business services as a mission-critical part of what they do – it’s not some services bolted on at the lowest possible price.

The big difference between procurement and outsourcing is the ongoing relationship, the fact that an outsourced service becomes a part of your value chain and is therefore mission-critical – you are not just finding the lowest possible cost supplier for an order of 10,000 post-it note blocks.

But the HFS observation on innovation is interesting. Innovation is an oxymoron in most outsourcing contracts. Suppliers talk of how innovative they can be, yet the service buyer usually wants reliable, repeatable services that don’t change.

Where I do think innovation is important for suppliers is in the areas where they can see their business headed, but no customers have yet asked for those services yet. In customer services, the use of social media is a great example. At TP we started focusing a lot of effort on using these tools several years ago, when customers were not really using social media as a customer service tool. Now, all of them are asking how they can use these channels and we have deep experience of blogs, Twitter, and running a Facebook community.

Some time ago, Hfs Research asked whether the industry should drop the term outsourcing. I think we all probably should. Saying that buyers and suppliers are partners in service delivery might sound like a sales cliché, but it is a lot closer to the truth than to persist in the old adage that the buyer has the cash and is powerful and the supplier is subservient and does only as asked.

Supply chains are far more complex today and some of the old terminology just doesn’t do justice to the industry.

Horses

Photo by Moyan Brenn licensed under Creative Commons

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