Dec 02

Is outsourcing only ever about reducing costs?

Posted by Mark Kobayashi-Hillary | Category: BPO, Globalisation | Tags: , , ,

We often focus on reducing ongoing costs through outsourcing. It’s all about reducing the cost of operation through automation and possibly offshoring. But it’s not all that inspiring is it?

Outsourcing used to be about reducing costs and then the industry spent most of the past decade trying to reinforce the other reasons for outsourcing. Allowing access to new resource and expertise and creating more flexibility to flex that resource for example.

Then the credit crunch occurred, and for the past couple of years, cost of service has returned as a primary driver for outsourcing. But many western European countries are pulling out of recession now. We are heading back into growth in most regions that are familiar with using outsourcing as a business strategy.

So, are we going to start seeing a change in strategy once again? I think it’s likely. I was at a conference yesterday hosted by the Philippines government and a large Telco firm described a case where their collections service (chasing unpaid bills) managed to collect four times the previous amount once they moved the service into an outsourced environment.

These are certainly the examples that will rise to the fore again as companies once again forecast growth with some confidence and outsourcing will need to support better, faster business, rather than just cost-cutting or survival.


  3 comments to “Is outsourcing only ever about reducing costs?”

  • 1 Stan Lepeak Says:
    December 14th, 2009 at: 3:28 pm - Report abuse

    Mark - I think cost cutting in outsourcing efforts has become the cost of entry. It’s a must-have requirement but not the only one though I agree it’s been more prominent over the past 12-18 months. Access to talent and the ability to shift focus of the retained organization to more strategic work are other major drivers.

    Relative to current market conditions I think there’s a danger that some outsourcing buyers become too fixated on cutting costs. As economic conditions begin to improve they may find themselves behind the curve against competition that use outsourcing as a means to support a growth strategy, for example, to enter new markets or support new product/service development.

    I think what will remain as a permanent change to the market is that buyers will continue to take a more pragmatic and incremental approach to outsourcing. I don’t expect we will see a return a large number of highly complex “mega-deals” or deals with vague and open-ended “transformational” agendas. Buyers will also continue to become more accepting of more standardized outsourcing offerings that can safely deliver clear benefits in a shorter time frame.

    One key challenge that remains is how to enable innovation in outsourcing. In a blog post on the EQ site (//blog.equaterra.com) I share some of the results of the just released UK ITO service provider performance and satisfaction study. In this study “innovation” is the lowest scored KPI against which buyers rank service provider satisfaction. Part of the challenge is to define what is meant by innovation. But even when this is done it is hard to work a concept like innovation into a contractually structured outsourcing arrangement.

  • 2 Philam Says:
    March 10th, 2010 at: 9:14 am - Report abuse

    No, it’s not only in reducing cost but also of high quality.
    Listed below some advantages here why outsource aside from the cost saving and high quality.

    * Experience
    * Seasoned American Management Onsite
    * Low Risk - because company’s interest is a long-term stability.
    * Security - invested significant resources into professional indemnity insurance.
    * Full Support Services - will support services go well beyond administrative duties

    I think that’s it. Please share your thoughts as well…

    * and many more….

  • 3 Mark Kobayashi-Hillary Says:
    March 11th, 2010 at: 12:41 pm - Report abuse

    Philam, I do agree that it’s more complex, but I’m not sure why you would list American Management in the bullet points? Why would that be an advantage? Not that I have an issue with American managers, but it pre-supposes that the client is American and needs local management!!

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