Introduction and background of European Outsourcing

This report is the result of EY’s European survey on outsourcing among market respondents, clients and service providers. Almost 3,700 respondents across eight European countries were questioned about the use of outsourcing in their businesses, their reasons for, and anticipated risks of, outsourcing, what they saw as developing themes and trends in the outsourcing market, their outsourcing experiences and other outsourcing-related topics. The respondents were interviewed by the use of an online questionnaire; the eight participating countries are: Netherlands 13% United Kingdom 14% Germany 14% Spain 14% Denmark 14% Sweden 14% Norway 8% Finland 9% • Denmark • Finland • Germany • Netherlands • Norway • Spain • Sweden • UK 8 Figure 3: Interviewed clients by industry Production 50% Services 30% Government and public sector 5% Trade and distribution 5% Other 10% Automotive Cleantech Consumer products Life sciences Manufacturing Mining and metals Oil and gas Power and utilities Financial services IT Management consulting Media and entertainment Private equity Professional services Real estate Technology Telecommunications Government and public sector Retail and wholesale Transportation Health care Other ITO BPO ITO and BPO 22% 45% 33% Figure 5: Service providers by type of main services Figure 4: Interviewed clients by revenue <€1b 33% €1b–€2.5b 3% €2.5b–€7.5b 27% €7.5b–€15b 17% €15b–€30b 10% >€30b 10% Outsourcing in Europe An in-depth review of drivers, risks and trends in the European outsourcing market 9 “When organizations perceive confidentiality as a risk of outsourcing they are less willing to outsource their service(s) to another country.” Grahame Butterscotch, Center of Excellence Out sour.

source

Transition and the retained organization of Europe

As attitudes to outsourcing become more focused, there is a realization that without much-needed transformation activities, many of the benefits of outsourcing cannot be realized. Another interesting aspect is that organizations are becoming increasingly aware of the need to have in-house resources with a new skill set, which can optimally manage the outsourcing services. The market is also seeing an increase in the use of external resources for support and advice in decision-making about outsourcing. 6.1 Most services outsourced on an as-is basis, but this is changing An essential factor of outsourcing services to an external provider is the transition phase. The largest group of our respondents indicated a preference to outsource most of their services as-is, without any transformation activities prior to or after the outsourcing transition. This mainly concerns first generation contracts (first-time outsourcing). Second generation contracts (from one outsource provider to another) include more transformation activities. Interestingly, not transforming at all conflicts with the main outsourcing objectives of respondents, i.e., cost savings and efficiency improvements. Outsourcing could stimulate an improved focus on core business, but by not transforming, any improvements in efficiency and costs are practically impossible. Some companies first lift and transform functions to a shared services center (SSC), after which the service can be outsourced as one harmonized function, including more chance of a fluent transition. In this case, the organization optimizes the function itself before outsourcing it to an external service provider. As organizations move to a more mature outsourcing stage, there will be more focus on transforming functions before moving services to providers, after which further transformation during the contract lifetime will take place. Figure 30: Transition approach across all countries The much-needed rise of transforming functions Transition and the retained organization 6.2 Service quality and rates the main focus of client and provider discussions During the transition of activities, multiple discussions exist between service providers and their clients. Figure 31 shows the most common, with quality of service listed as most discussed. Essential for both the client and service provider is to make solid agreements on the transition service level agreement (SLA), since this is often forgotten. Obviously, the rates for services are part of the discussion as well, but interestingly, at a number of outsourcing initiatives, this is still an item of discussion during transition phase. Rate discussions would be expected to be finalized and documented in, for example, a rate card, once the contract is finalized to avoid such discussions later on in the transition. First transform, then outsource 22% Combination 25% First outsource, then transform 20% Transition of services as-is (no transformation) 33% 0% 10% 20% 30% 40% Quality of service 43% Rates for service 35% Responsibilities of each party 25% Planning 24% Budget during transition 23% Level of standardization or customization of services 22% Change in resources or team 20% Additional change requests 17% 0% 10% 20% 30% 40% 50% Figure 31: Discussion elements during contract life cycle 30 The reasons for discussion during transition of services appear to be the same across countries, with only some country-specific deviations. The most interesting gap is between Sweden and Finland; Sweden marginally discusses the responsibilities of each party during transition, where Finland seems to be very critical along most of the axes. Apparently, in Sweden, generally, the roles and responsibilities are clearly agreed upon, limiting the reasons for discussing these during the contract life cycle. Only a very few respondents report having no discussions at all during transition. Figure 32: Reasons for discussion in the transition phase 6.3 Retained organizations employing new resources with different skill sets Transitioning to the service provider is an important factor in the success of the outsourced service. Both the retained organization and the transition methodology define the chances of success. When asking organizations how they structure their retained organization, most reply that this is a combination of specialists and experts already employed by the company working in the outsourced function, and newly attracted resources with a specialized skill set. Organizations seem to realize that successful management of the service provider requires a combination of additional skills and knowledge of the organization and the outsourced service. Figure 33: Structure of retained organization When looking at the size of the retained organization compared with the outsourced service, there is no “one size fits all,” with variances from between 0% and 5% to more than 50% of the outsourced service. Remarkable is that more than 40% of the organizations indicate that their retained organization is rather large, i.e., more than 20% larger than the outsourced function measured in FTEs. For such large retained organizations, it becomes very difficult to realize the most important objective for outsourcing – cost reduction. The diversity in size of the retained organizations can be explained by differences in responsibilities. Retained organizations managing their outsourced services in detail are in general larger than retained organizations that have fewer responsibilities. Figure 34: Size of retained organization as % of outsourced service 6.4 Use of external support in decision-making for outsourcing When asked whether they engage with external sources, 42% of organizations indicate external sources are used in the preparation and execution of outsourcing initiatives. When comparing countries, Germany and the UK are most mature in using external support in their outsourcing engagements. The Nordic countries overall use the least support when outsourcing business or IT processes. In 75% of cases, no external support is used. Figure 35: Use of external support 0% 5% 10% 15% 20% 25% 30% 35% 40% A combination of both 24% New resources with a special skill set were attracted to fulfill the demand management function 38% Specialists and experts previously working in the outsourced function are fulfiling the demand management function 38% 0% 10% 20% 30% 40% 50% 60% Rates for service Responsibilities of each party Planning Level of standardization or Budget during transition customization of services Change in resources or team Additional change requests No discussion Norway Finland Other countries Quality of service 13% 15% 18% 5% 5% 12% 17% 14% 0%–5% 6%–10% 11%–15% 16%–20% 21%–25% 26%–30% 31%–50% More than 50% Germany 46% United Kingdom 50% Netherlands 46% Spain 41% Sweden 39% Norway 33% Finland 31% Denmark 29% 0% 10% 20% 30% 40% 50% Outsourcing in Europe An in-depth review of drivers, risks and trends in the European outsourcing market 31 Of all respondents using external support for their outsourcing engagements, most engage them for their independent view and to gain expertise about outsourcing initiatives and approaches. Figure 36: Reason for external support Transition and the retained organization Germany 19% 25% 22% 13% 12% 8% 1% Finland 10% 28% 23% 18% 15% 5% 3% United Kingdom 24% 19% 16% 21% 15% 4% 1% Norway 16% 22% 16% 19% 16% 9% 3% Sweden 20% 23% 14% 23% 11% 9% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% An independent view on clients’ outsourcing initiatives Gain expertise and experience on outsourcing approach Improve quality of the decision-making process Gain expertise and experience in the outsourcing market Reduce risk Other namely Efficiency improvements Denmark 9% 17% 14% 29% 26% 3% 3% Netherlands 31% 12% 12% 18% 19% 7% 1% Spain 20% 21% 11% 23% 14% 11% 0% 46% An independent view on clients’ outsourcing initiatives 46% Gain expertise and experience on outsourcing approach 39% Improve quality of the decision-making process 36% Gain expertise and experience in the outsourcing market Reduce risk 30% Efficiency improvements 16% Other 2% 56% 44% Yes No An interesting difference between countries is the reason for external support. The Netherlands focuses mainly on obtaining an independent view on outsourcing initiatives, whereas Denmark, for example, mostly wants to improve the quality of the decisionmaking process. This could be explained by differences in outsourcing maturity within these countries. Figure 37: Reason for external support per country 32 What this means for businesses Transformation: building a strong base There are two elements to transforming. The first is changing the process at a functional level. This is what organizations tend to focus on, because it is within the gift of the service provider to help push. The second is transforming the operational design, i.e., the retained organization, and this can’t be influenced by the service provider. Unless the client brings in specific outside help to do this, it is difficult for them to get it right. This is because not only does the organizational design need to change, but the way people work and the roles and responsibilities that they have in the retained organization must also change. And people’s capabilities to deliver must change too. It can cost less in the long run if you invest in getting processes right before you outsource them. If a business transitions a service or function that is soundly run, the provider will be better prepared to focus on excellence because the organization would already be there and the inefficiencies already eliminated. The business can outsource at a lower cost, without paying for expensive remedial action. Indeed, a knock-on effect of doing it this way is that the relationship with the service provider is on a solid footing from the very beginning. If you transition broken processes, and they’re transformed by the service provider, what will tend to happen is that the relationship is rocky right at the beginning as both parties suffer from operational teething problems at a stage when they have not had time to forge trusting relationships. However, some organizations don’t have the capability to change the services themselves, and are reliant on an external provider to help them. Service quality: managing expectations Unless the parties have an established, trusting partnership, their relationship will be governed by SLAs. Many clients find that SLAs are not delivering what they want. This is because, at the beginning of the relationship, they fail to establish the right SLA. The service provider maintains that they are delivering to the SLA that was agreed, but the client feels that this is beside the point because the SLA was not appropriate in the first place. The client will aspire to best-in-class service, while the provider may be taking worst-in-class service from the client’s hands and improving it. So, an expectation gap about the pace of progress can be built in from the start. Managing expectations is key. Figure 32 shows how, in Norway, there is much less discussion about rates and service quality. So, apparently, clients in Norway have done a much better job of defining the SLA. This is perhaps because, right now, the Nordics is a very hot region for outsourcing. Countries in this region have come to outsourcing later than others and they have learned much more, very quickly. They are better informed about how to structure an outsourcing deal. Outsourcing in Europe An in-depth review of drivers, risks and trends in the European outsourcing market 33 What this means for businesses Organizations should be aware that while they may be approaching outsourcing for the first time, the providers will have been through the negotiation process hundreds of times. They will be much more experienced at negotiating SLAs – and knowing how SLAs can work in their favor. So, to redress this imbalance, organizations must make sure that they are properly advised. Skill sets: retain your capabilities Once you outsource a service, you have to build a retained organization that manages it and ensures that you get the service you need. It’s important for the business to retain key subject matter specialists who know the business back to front. They are the people who will help manage the relationship with the provider. If outsourcing the function does not work, they offer the capability to build it up in-house again. Organizations also need people to manage the contracts. Working with a service provider is a specialist skill for which companies must provide. External support: the value of good advice Figure 35 shows that the more mature outsourcing markets, such as Germany and the UK, are more likely to use external support when outsourcing. Of interest are countries, such as Denmark and Finland, which are showing as less inclined to rely on other advisors to help. There are a number of reasons why this might be. The Nordics, as a region, came to the outsourcing market later than other countries, and this means they’ve had the benefit of learning from others’ experiences. So, in the Nordics (and this pattern can be seen in other geographies too) organizations that have been preparing to outsource have researched the process and learned to do some of the work themselves. Meanwhile, some that are onto their second or third generation contracts have gone through the process before, and are confident enough to run the selection process themselves, while seeking advice on other issues. Others, naively, think that they can undertake the whole task of establishing a relationship with an outsourcer. Often, they don’t get a good quality of service at the end of it, because they don’t actually know what they need in the first place. Getting an independent view on outsourcing initiatives – and ensuring that the right balance of processes is outsourced – is critical. An expert advisor will look at an organization’s risk appetite and assess what services, in reality, that organization will accept being outsourced. The advisor will help present options, some of which will push boundaries, and help the organization find the balance of purposeful outsourcing while staying true to themselves.


source

Service providers and contracts for outsourcing

There is a growth in outsourcing to industry-specific service providers, and even smaller organizations have increased the services they are prepared to outsource. With regard to contracts, fixed price and full-time equivalent (FTE) are still most widely used; however, there is a small, but significant, shift toward outcomesbased pricing, which is anticipated to grow in coming years. 5.1 Clients looking for industry-specific solutions For most services, the outsourcing market has reached a rather mature level. Many providers have been servicing clients for several years on most of the indicated services. However, the market strategy and focus of these service providers differs. Some service providers are convinced that they can serve their clients best if they focus on providing a number of services to one or more industries. These industryspecific service providers develop and maintain their services based on the specific industry needs. Another category of service providers, generalist service providers, focus instead on a number of specific services (e.g., finance and accounting and HR services, or application development and application maintenance). These providers deliver their services to clients across different industries and focus on the elements that bind the services across industries. Figure 25: Type of service provider per country Most respondents outsource to industry-specific service providers, especially those in Finland, Spain and Germany. Furthermore, as organizations increase in size, they are more willing to outsource to generalist service providers. This is interesting, as most generalist service providers are larger organizations themselves. In most cases, however, these provide an industry-specific service offering. One client even remarked: “We would expect that all service providers are industry-specific now – either as a specialized provider to the vertical or horizontal, or through a specific go-to-market or business development approach.” Figure 26: Type of service provider per size of organization 5.2 Fixed price and FTE-based pricing arrangements most common The most common financial arrangement for outsourcing contracts is still the fixed price and FTE-based pricing arrangement, and has been confirmed in the qualitative sessions held with clients and service providers. These contracts often come combined with FTE-based pricing and often include employee transfers. Most first generation outsourcing contracts are based on a fixed price arrangement, whereas second generation contracts are more often focused toward volume variability and gain share arrangements. “Fixed price can be beneficial in that it reduces the overhead to manage the contract and invoicing, but can be more risky as you have to contract for everything explicitly and be clear on scope. For the future, we would look to move toward outcome-based pricing – so transaction based with flexibility to ‘flex’ the demand of personnel within limits,” observed one client. Figure 27: Financial arrangements of outsourcing deals When looking at country differences, Denmark and Finland by far make the most use of fixed price arrangements. Risk and reward is more common for countries such as Germany and the UK. The market is “growing up” Service providers and contracts 0% 10% 20% 30% 40% 50% Cost plus Transactionbased fee Gain share Other Fixed price and FTE-based Risk and reward 60% 53% 24% 19% 17% 11% 0% Norway 55% 45% United Kingdom 61% 39% Finland 75% 25% Denmark 63% 37% 0% 20% 40% 60% 80% 100% Netherlands 53% 47% Germany 66% 34% Outsourced to industry-specific service provider Outsourced to a generalist Spain 70% 30% Sweden 52% 48% 65% 35% More than 10,000 0% 20% 40% 60% 80% 100% 56% 44% 1,001 to 5,000 68% 32% 201 to 1,000 71% 29% 5,001 to 10,000 Outsourced to an industry-specific service provider Outsourced to a generalist 26 5.3 Innovation a problem in outsourcing contracts Although innovation is stated as being an important requirement of outsourcing, it is not addressed in 41% of outsourcing agreements. Further analysis and discussion with clients and service providers show that defining innovation is the biggest challenge for both. Organizations are struggling with the term innovation. “What is continuous improvement and what is innovation? It’s very difficult to define, and innovation is a real struggle to articulate,” expressed one client. “Innovation is an integrated part of all outsourced services – but it is difficult to make it work.” There appears to be a more specific role for service providers to explain innovation to clients and show how innovation is included in the provided services. Client organizations want to see more specific innovation from providers. Figure 28: Innovation elements in outsourcing contracts 41% 20% 19% 17% 15% 14% 13% There are no agreements on innovation during contract lifetime The internal organization and the service provider are together responsible for innovation There is an (annual) budget assigned to invest in innovation The service provider has to deliver a certain innovation level during contract lifetime The service fee is based on the level of innovation Innovation board appointed which is responsible for delivering innovation Innovation days are organized on a regular basis 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% a. No sustainability elements are agreed with the service provider Other The service provider is monitored on CO production 2 Part of the service fee is invested in sustainable initiatives The service provider guarantees that no child labor is used The service provider is certified on sustainability Particularly in production and industry branch 44% 26% 19% 16% 14% 0% 5.4 Most outsourcing agreements include sustainability Beside the general trend of sustainability, we also asked respondents to indicate what sustainability agreements are made with their service providers. For the purposes of this study, we have defined sustainability as a range of environmental and corporate social responsibility elements. Over 55% report specific sustainability agreements with service providers in the outsourcing contract.

source

The outsourcing market in Europe

Increased confidence and understanding among players, but lessons still to be learned

 The outsourcing market in Europe Netherlands 13% 87% Norway 10% 90% Germany 15% 85% Finland 19% 81% United Kingdom 17% 83% Denmark 9% 91% 0% 20% 40% 60% 80% 100% Sweden 9% 91% Outsourced In-house Spain 17% 83% As competition, both within Europe and globally, continues to rise, organizations are increasingly more open to outsourcing as a valid means of cost reduction, particularly with regard to IT and business processes. Furthermore, certain industry sectors are more willing to outsource than others, and there is a mixed picture concerning the desirability of onshore, nearshore and offshore service provider locations. 3.1 Who’s outsourcing what – the general picture In today’s market, outsourcing is a key business tool leveraged by most major enterprises. Two decades ago, organizations began to initiate shared service centers to improve the efficiency of their back-office processes. For many organizations, outsourcing was the next step to cutting costs and further improving efficiencies. Outsourcing today is no longer seen as exclusive to a specific size of organization or industry; however, there are differences in services being outsourced within various countries. Figure 6: Outsourcing of services per country IT and business processes most favored for outsourcing Organizations in Finland, Spain and the UK outsource services to external service providers more often than other countries in our survey. In these countries, the highest percentage of outsourcing is seen in IT services, such as application development, IT helpdesk, infrastructure and testing, but also payroll services. Other business processes, such as sales, procurement and HR services, are outsourced less in these countries, but still more frequently than in the other countries.

Sweden and Denmark have the lowest levels of outsourcing. Although IT services such as application development and IT helpdesk services are outsourced to some extent, marketing, HR services, sales and procurement are outsourced only on a very limited scale. However, according to respondents, Denmark’s organizations are expecting to increase outsourcing of services in the coming years (see paragraph 3.6 for more details on future predictions). Figure 7: Outsourcing of services per industry Differences between industries There is a marked difference in outsourcing of services between industries. The consumer products industry outsources most readily compared with other industries, followed by organizations in the automotive, telecommunications and management consulting industries. In the manufacturing industries, such as consumer products and automotive, margins are low, whereas in telecommunications, revenues are tight and declining – and all industries are seeing fierce competition, both within Europe and globally, hence we find a constant focus on cost reduction and a willingness to leverage sourcing models. Management consulting and services, generally, is a heavily acquisitive industry, characterized by new business models; consequently, outsourcing is considered normal practice for many non-core functions and services. Reasons for outsourcing The main reasons given for outsourcing in 2013 are cost reduction, followed by efficiency improvement and reduction in headcount, continuing a wellestablished trend. Organizations in the cleantech and IT industries execute most services in-house. Cleantech industry margins are relatively high, which reduces the pressure to lower costs by outsourcing. Organizations in the IT industry are naturally strong in

the delivery of core IT services and, as these are the most readily outsourced services across the market, it is perhaps not surprising that the IT industry has the lowest percentage of outsourced services overall. Traditionally, government and public sector industries have not generally outsourced; however, our survey reveals that they now score average in outsourcing of services. Figure 8: Outsourcing of IT services per industry IT functions are outsourced most in the automotive industry, followed by the telecommunication and consumer products industries. Automotive organizations have, on average, outsourced 42% of their IT services – comprising mainly testing, other ITO services, helpdesk and support – to an external service provider. Figure 9: Outsourcing of business process services per industry Business processes are outsourced most in the management consulting industry, followed by the consumer products and oil and gas industries. The main business process services outsourced in management consulting are facilities, payroll services, and production and development services. Whereas organizations in most industry sectors outsource more IT services than business process services, the oil and gas industry is different. This may be explained by the maturity level of the IT function in these organizations, which in general is higher than in other industries, and there is therefore less benefit to  Figure 10: Outsourcing of IT services The above chart indicates that approximately threequarters of IT services at respondent organizations remain in-house, indicating that even a mature market, such as ITO, demonstrates large potential for growth in the coming years. Figure 11: Outsourcing of business process services Looking at what services organizations outsource most, IT services still lead, and appear to be the logical starting point when it comes to outsourcing. Once these services are outsourced, organizations are willing to identify outsourcing opportunities for business processes and services. This underlines a more mature market for IT services than for business process, albeit that the latter has been improving in recent years. Services such as sales and procurement remain among the least outsourced; this is surprising as, according to last year’s respondents, these were expected to grow. This might indicate that either initiatives to leverage the market for these services stalled, or other pressures from respondents’ core markets eased, leading to changes in priorities. Infrastructure and Telecommunication 35% 65% Consumer products 31% 69% 0% 50% 100% Oil and gas 13% 87% Automotive 42% 58% Outsourced In-house IT 10% 90% Mining and metals 7% 93% 0% 50% 100% Other 10% 90% Oil and gas 18% 82% 25% 75% Management consulting Outsourced In-house Consumer products 21% 79% IT helpdesk and support 25% 75% Desktop and workplace management 15% 85% Application management 19% 81% Outsourced In-house 0% 20% 40% 60% 80% 100% Testing 21% 79% Infrastructure and data center service 22% 78% Other ITO services 26% 74% Application development 27% 73% Procurement 7% 93% Legal services 19% 81% Production and development 9% 91% Knowledge processes 7% 93% Payroll services 18% 82% Facilities management 19% 81% Design and engineering 13% 87% Finance and accounting 7% 93% Call center and customer support 15% 85% Outsourced In-house 0% 20% 40% 60% 80% 100% Sales 6% 94% HR services 7% 93% Logistics 16% 84% Marketing 9% 91% Outsourcing in Europe An in-depth review of drivers, risks and trends in the European outsourcing market 13 Figure 12: Location of outsourced services per country The outsourcing market in Europe United Kingdom 77% 10% 14% Netherlands 76% 11% 13% Germany 65% 21% 14% Denmark 59% 26% 16% Finland 74% 18% 8% Norway 80% 10% 10% Sweden 87% 9% 5% Spain 86% 11% 3% 0% 20% 40% 60% 80% 100% Onshore Nearshore Offshore data center services are more outsourced than last year; in 2012, only 11% of the organizations surveyed outsourced their infrastructure services whereas this has doubled to 22% this yea

source

6 Outsourcing Trends to watch out for in 2016; a perspective from Global Remote Services (GRS)

6 Outsourcing Trends to watch out for in 2016; a perspective from Global Remote Services (GRS)

Global contact centre outsourcing experts, Global Remote Services (GRS) have highlighted the top 6 outsourcing trends that will be strategic to customer relationships for most businesses this year.

“From GRS’s perspective these are the top outsourcing trends that will shape customer experience and helpbrands gain competitive advantage through 2016 and beyond. The first three trends affect customer relationships and re-thinking current contact centre business models. The second three address growing trends we are seeing and the real issue of security” says Paolo Marcattilj, UK Director and Shareholder of GRS.

“In essence this year looks likely to bring a whole range of new trends and technologies that will allow businesses to compete and differentiate their unique service offering. Outsourcers will be able to transform the way they engage and maintain their customer relationships.”

The top 6 contact centre outsourcing trends are:

1) Outcomes will outweigh cost -as businesses closely focus on the outcome of their customer conversations rather than the cost of the transaction. GRS believe 2016 will see outcome based costing evolve as this trend continues.

2) Adoption of data driven cultures – data and analytics will play a key role in outsourcing strategies. Businesses will rely on better data and cost transparency to understand and maximise opportunities both in their management and operational processes

3) Nearshoring will continue to gain momentum in Eastern Europe -nearshoring is fast becoming an option which is seen as being more skill specific for businesses with a mixture of complex, high-end projects as they realise the value in keeping outsourced work close to where the business generally is. Nearshoring in Eastern Europe will continue to grow as it becomes attractive and competitive to the UK market, and also much ‘nearer-to-final-customer’ and ‘easier-to-manage’ versus far-shoring.

4) Impact of technology- technology such as cloud solutions and voice recognition will continue to drive new ways to outsource, new operational models and new services; all will provide improved value for end customers.

5) Focus on talent and language ability–outsourced contact centres will increasingly be required to have access to a ready supply of qualified people and a large talent pool to cover the increasing multilingual needs of clients. GRS predict a sustainable high performing outsourcing culture for 2016.

6) Prevention of data breaches – the threat has never been more real and businesses will now start to take this seriously and invest in the infrastructure required to prevent these.

source

New trend: HR outsourcing in Australian facilities

Traditionally, outsourced talent and management services have been the domain of larger enterprises and corporate entities. Among smaller and medium-sized companies, which of course includes many facilities around the country, hiring and managing a workforce generally falls to each departmental head.

Recent developments are changing the playing field however, with a much wider array of services appealing to organisations of all kinds, shapes and sizes. Digital delivery means that a large proportion of solutions can be administered remotely and accessed quickly and easily by one end-user such as the facility manager, and also allows solutions to be scaled easily to suit the size and style of facility.

Recruitment Process Outsourcing (RPO) stands as the driving force behind this change, continuing the push by many companies and facilities towards using more business process outsourcing (BPO) services. RPO is basically the transfer of all or part of a facility’s recruitment processes to an external service provider. A company offering RPO solutions may either adopt the staff and methodologies of the client company, or bring their own staff, technology, methodologies and reporting.

Ultimately, RPO providers assume ownership of the design and management of the recruitment process and the responsibility of results for the company or organisation they represent.

One aspect of RPO that is of particular use to facilities in Australia is the flexibility they can provide. A mix of permanent and contingent workers is becoming more common in Australia, with Ardent Partners predicting that 45 per cent of the total corporate workforce will be considered non-employee, contingent or contract-based by 2017.

“Contingent workforces help organisations scale and flex by providing additional capacity exactly when it’s needed. Managing such a flexible workforce can seem threateningly complex, but that is where a solution provider comes in,” said Caleb Baker, Managing Director – APAC and Emerging Markets of Alexander Mann Solutions.

Consider a situation where a facility’s foot traffic increases greatly at certain times of the year, then drops back to a steady level. Being able to call on a contingent workforce is crucial, as it provides the staffing needed to cover the influx of trade or visitors. Calling on the services of an RPO provider allows the facility to gain the workforce they need without the attendant hassles of advertising, interviewing, selecting and hiring a workforce, only to have it dismissed again shortly afterwards when the project or event has passed.

Flexible solutions can be scaled up or down to meet the needs of fast-growing organisations as well, with some service providers catering for a pay-by-the-employee approach.

“A turn-key solution allows smaller and medium-sized businesses to deploy a fast, scalable service at a fixed price, digitally administered from one central location. Since the structure and price are pre-determined there are no nasty surprises, and therefore no issues with visibility or accountability. In essence, a facility in Australia can now access the same level of resources as an enterprise-level corporation,” said Baker.

Larger facilities have been using RPO services for years, but the nature of the service has evolved lately, responding to the rise of digital platforms among large and small corporations. Service delivery can now be maintained from a virtual team, and underpinned by technology such as PeopleFluent’s recruitment management system, Broadbean’s vacancy posting and database searching tools, and ServiceNow’s user support capabilities.

Alexander Mann Solutions’ Baker said: “technology is leading the way for SMBs in Australia, in all facets of running a business. Recruitment and management companies simply had to respond in order to stay relevant, and it also gives us the opportunity to extend services to new areas of the marketplace here in Australia.”

So, what is involved in moving to an RPO model of recruiting? There is quite a lot more involved than simply changing the operations of a facility’s hiring functions. There will be a significant rearrangement of the complete recruitment and resourcing lifecycle, which will deliver significant benefits over the traditional managed services offered by recruitment companies. Perhaps the most obvious of these is the realigning of different recruitment areas, creating a seamless link between the on-boarding of permanent and contingency staff, as well as redeployment, mobility and outplacement.

Facilities management in Australia can benefit from RPO in many ways, especially with the Federal Government’s hiring freeze now lifted for many departments. With strong demand for skilled staff continuing in the public and private health sectors, as well as for project managers in the construction space, it might be time to have a fresh look at the recruitment options available.

source

 

CIOs as change agents of outsourcing

CIOs as change agents

It is benefits such as these which could put the CIO in a leading role in the business. The CIO’s visibility across the organisation means they are well positioned to understand the various business processes and interdependencies.

“They can play a key role in the outsourcing relationship, helping to elevate the role of IT to a business enabler and source of competitive advantage,” says Sagoo.

Planning and selection of BPO services and providers is an area where the CIO will need to play a key role, he says: “The CIO’s role will increasingly deal with information rather than technology, fulfilling the original vision of the role. As technology becomes more transparent and cloud architectures reshape and simplify delivery infrastructures, the CIO will need to be more focused on understanding and supporting the needs of the business by ensuring availability, accuracy, consistency, and timeliness of information to users and processes across the business.”  

Oshri agrees that CIOs are playing a bigger role. “A sourcing decision is no longer a standalone decision about the IT component, but rather moving towards an integrated sourcing approach in which executives will need to consider how IT can be aligned into business processes and how IT can improve business process performance. The CIO is central to such discussions within the firm and with the firm’s supplier network,” he says.

“CIOs are increasingly becoming the business technology change agents within the enterprise,” says Cognizant’s Roehrig. “The role of the CIO is evolving from the caretaker of the systems of record to the person who unlocks value at the intersection of process and technology. The CIO of the 21st century will be instrumental in helping unlock process-aligned business value.”
IT-enabled BPO is a huge sector – it dwarfs the IT outsourcing sector in terms of spending – but as businesses attempt to take advantage of new technology trends, the IT element of BPO relationships will grow at the expense of people.

Technology trends such as cloud computing and big data are supported by technologies such as social media and smart devices to create new services to complement BPO.

source

How technology is changing BPO

Technologies such as cloud computing, business analytics software, social media platforms and process automation software are being used within BPO to enable businesses to lower costs and be more effective.

Recent research from Accenture revealed that high-performing BPO relationships – those that deliver business value – use technology as a source of innovation and advantage, rather than just providing the infrastructure of delivery. It found that 40% of high performers consider technology provided by the service provider to be an important component of the BPO relationship, compared with only 27% of typical performers. A total of 56% of high performers believe it is important to gain access to technology in a BPO relationship, while 34% of typical performers agree.

“Effective technologies and architectures contribute to cost reductions and more efficient operations by streamlining the systems environment and reducing the number of systems involved, often standardising the technology environment on a unified, centralised platform,” says Anoop Sagoo, products industry BPO lead at Accenture.

Planning and selection of BPO services and providers is an area where the CIO will need to play a key role

Ilan Oshri, a professor at Loughborough School of Business, says IT is increasingly becoming part of the service, as well as the platform through which they are provided. “Businesses have been considering more functions for BPO, mainly because of the current economic conditions and because the suppliers [can now] provide BPO services much better than 10 years ago,” he says. “Buyers are also expecting vendors to deliver high value, and therefore expect the vendor to work closely with them on improvements.”

At the same time, says Oshri, it has become critical to buyers to consider alignment between IT and business process performance.

source

New Trends in Global Offshore Outsourcing: A Comparative Assessment of India and China

Abstract

With the rapid rise of globalization, the challenge of global outsourcing today is not “Why and what to outsource?” 

but “How to outsource?” The theme today is “Let us do it right the first time.” The barriers to outsourcing are

 companies’ own mind-sets, local regulations, and the robustness of their internal processes. The domain 

knowledge in many industries has gone fully global. Likewise, new product development and R&D must be global in

 order to compete in emerging economies and to tap into global talent to compete globally. Software development 

and IT outsourcing can be done from anywhere, virtually! The availability of mobile technology and superior digital 

infrastructure is giving way to “distributed IT,” making “homes” as the future nodes of outsourcing factories. China 

and India have emerged as the major leaders in this industry due to their capacity, talent pool, and lower cost 

structure. This chapter compares their strengths, challenges, and growth potential based on the authors’ own 

hands-on experience of doing outsourcing in these countries for the past 15 years.

source

7 Key Trends for Business Process Outsourcing (BPO) Industry 2015 & beyond

1. Shift to Cloud & Virtual Workforce (Work At Home Agents- WAHA)

• The majority of the features and trends for the BPO industry in 2015 are based on using a robust cloud-based software system that takes most of the heavy lifting off premise.
• As per industry research, 18% of workforce will be cloud based in 2015
• Gartner called it a “seamless shift between computing and communicating.” Along with increased interest in BYOD/T, organizations are dealing with more complex architecture and operations, new ways of addressing governance and security and the rise of a remote, cloud-based workforce.Not to mention an increasingly cloud-based clientele.
• As companies continue to need more real-time analytics and multi-channel connectivity, the demand for cloud services can only increase. This has encouraged outsourcing companies to develop their own or endorse specific ones.
• Increased Work at home- Virtual agents

2. Omni-channel

• Social Media for CRM will Force a Shift from Contact Centers to Customer Engagement Centers- By 2015, organizations that have not embraced the concept of the customer engagement center will lose customers to competitors that have
• The best customer service software has the capabilities to allow you and your team to communicate through multiple avenues.
• New channels- Video Support. WebRTC (Web Real-Time Communication) is an API definition hat supports browser-to-browser applications for voice calling, video chat, and P2P file sharing without the need of either internal or external plugins.

3. Smart Customer Service/ Gamification

• Gamification is the use of game thinking and game mechanics in non-game contexts to engage users in solving problems and increase users' self-contributions.
• By 2015, more than 40 percent of the top companies would be using gamification to transform their business operations.
• Work Force Optimization - Single view to the customer who is contacting from various channels
• Real-time Reporting & Analytics- instead of randomly sampling transactions as part of a traditional QM process, speech/ text analytics can actually alert compliance teams to possible issues – and take them directly to those specific interactions or sets of interactions that are most relevant.
• Robotic Processs Automation- Robotic process automation (RPA) is the application of technology that allows employees in a company to configure computer software or a “robot” to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses and communicating with other digital systems. As RPA brings more technologically-advanced solutions to businesses around the world, operating models that adopt automation, whether in-house or offshored, will cut costs, drive efficiency and improve quality.

4. Mobile Based customer service applications- may not need a desktop

• Shift from IVR to smart visual mobile apps
• Customer Verification- Biometrics based, NFC based etc.- Instead of wading through multiple questions and client verification procedures, biometric voice systems can immediately verify the identity of your clients. This feature alone will shave minutes off of each call, exponentially increasing productivity.

5. Integration of CRM & Marketing

• Collaboration between customer service and marketing- delivering more consistent messages across all the touch points, they're going to be looking at aligning customer service calls with marketing.
• As the contact center moves to the cloud and is getting integrated with CRM, and business’ marketing channels, it has become a businesswide concern.
• Gartner’s predictions that the CMO will soon be buying more technology than the CIO, we are seeing that marketers are increasingly likely to be spearheading the contact center’s move to the cloud.

6. Client-Vendor Partnerships

• Managed Service Providers are generally no longer serving technological needs from a checklist. Many are working together with enterprises asconsultants, planners, and advisors. A close relationship provides many benefits and enables businesses to better approach initiatives and focus on long-term goals.
• Increase in out-come based pricing models, and a closer review and development of business continuity and disaster recovery plans.
• Mature client-outsourcer relationships are anticipated to “lead to a gradual shift to outcome-based pricing models” with highly experienced clients and outsourcers who have built mature relationships beginning to develop contracts with a “sliding scale of rewards for approaching desired outcomes,” ensuring that providers aren’t locked into an “an adverse all-or-nothing scenario.”
• Companies are now more open to collaborations with their providers in terms of streamlining their processes in an effort to become more efficient thereby continuously decreasing operational costs.
• Companies continue to move towards building strategic partnerships in order to take advantage of opportunities.
• Many businesses are now going beyond the affordability factor when it comes to choosing partners and providers.

7. Domestic Outsourcing

• Economic changes have raised the demand for employing American providers, removing constraints such as language barriers, international law, and currency exchange. Some companies are highlighting home-grown outsourcing as part of their marketing. By working with U.S. providers, however, there are many operational and cost-saving benefits.
• US BPO market is set to expand in response to the rising costs associated with offshoring to emerging markets
• Shift in outsourcing activity back to the U.S and its near-shore neighbors- sparked by a series of factors such as rising wages in China and India; increased demand for American-accented English and Latin American Spanish in contact-center services; and companies preferring to work with geographically-closer outsourcing providers within familiar time zones.

source