2016 Global Outsourcing Survey

Companies are broadening their approach to outsourcing. They look for managed service providers to offer robotics, cognitive automation, operational flexibility and scalability.

Businesses and organizations are increasingly viewing outsourcing as more than a cost play and, accordingly, expect more from their vendors, that is apparent from the 2016 Global Outsourcing Survey.

This “more” they seek comes in the form of the transformational benefits that managed service providers can offer through robotic and cognitive process automation, operational flexibility and scalability, merger and acquisition enablement, and risk mitigation—all leading to an increase in service innovation as the result of rapidly changing technology.

Leaders from organizations of all sizes and operational footprints in the Americas, Europe, and Asia within more than 25 different sectors including IT, finance and HR.

Innovation enable business functions
Responses indicate that the market is looking to evolve the outsourcing process so that it yields benefits beyond the narrow scope of the agreement. The central focus of value is how innovation can act as an enabler of the business function.

This has become an ambition, but it is often elusive in its realization as the market continues to struggle to define what innovation is. The real innovation taking place is outsourcing’s enablement of organizations to buy a “module” of service that can be effectively procured, integrated, used for a period of time, then safely removed from the environment when its useful life has expired.

It is this process—not just the reduction in costs (though this is also critical)—that outsourcing-done-right can provide in order to help organizations maintain and improve competitive advantage.

Effective vendor management drives ongoing value
Once service providers have been engaged, the attention turns to transitioning services and then to governing and managing the vendor relationship.

The survey results demonstrate that desired outcomes can be achieved more effectively when organizations spend more time on competitive vendor selection and transition, and constructing better SLAs. Similar to our 2014 findings, vendor management continues to be an underused enabler of value creation. Investments in VMOs tend to be relatively low. Nonetheless, survey respondents perceive vendor management to be effective in driving value, particularly through contractual and financial management, as well as in governance.

In these categories, companies generally view their capabilities as being at or above average. In truth, VMO investments are probably not fully realized since respondents reported significant savings attributable to VMOs, even though few spent a meaningful portion of outsourcing costs on them. Fortunately, a majority of respondents are working actively to improve their VMOs’ capabilities.

Stronger governance supports operational excellence
A clear link remains between operational excellence and governance-model maturity. A growing number of companies are strengthening their vendor management and relationship-management capabilities. This enables them to use contractual levers and oversight activities, such as implementing clear and mature escalation paths, to resolve vendor performance and disputes rather than triggering termination rights.

2016 Global Outsourcing Survey