Organisations Grapple with Challenges of Managing Multi-Provider/ Multiple Outsourcing Efforts
Under embargo until 00:01 October 28, 2008 – Despite the fact organisations worldwide are deferring capital expenditures, outsourcing continues to be the number one tool chosen to drive organisational change, according to EquaTerra’s Advisor and BPO/ITO Service Provider Pulse Survey 3Q08.* The findings show demand for outsourcing is outpacing business investments in areas such as hardware, software or other types of more discretionary project-based services.
Growth in outsourcing was positive, but mixed across market sectors with over 40 per cent of those polled citing increased demand levels in the quarter. The survey also revealed that focus is shifting from longer-term initiatives aimed at improving end-to-end business processes and moving toward efforts that deliver quick return on investment (RoI) and/or facilitate short-term business objectives that bring immediate cost savings, help align operating costs to reduced revenue/profits levels and reduce short-term capital outlays.
Key findings from EquaTerra’s 3Q08 Pulse:
• Demand for outsourcing – Demand for BPO and ITO rose in 3Q08 according EquaTerra advisors, and was mixed according to service providers. Demand was stronger in Europe than in the North America (64 per cent of EU advisors cited increased demand compared to 25 per cent in the Americas) and slightly stronger for BPO (58 per cent) over ITO (39 per cent). Service providers polled were somewhat more pessimistic on demand levels, but, overall, are still seeing market growth.
• Forty-one per cent of service providers characterised their 4Q pipelines as up; a drop of 11 per cent from last quarter and below the survey average of 55 per cent,
• Economy both disrupting/driving deal flow – Thirty eight per cent overall (service providers 43 per cent, advisors 33 per cent) cited economic conditions as causing buyers to slow or defer outsourcing efforts, the highest level cited over the past three quarters. However, 42 per cent of overall survey respondents indicate economic conditions are driving more outsourcing, despite slowness in certain market sectors.
• Increased pricing competitiveness– Half of the service providers polled reported more aggressive pricing, up 15 per cent, but contract profitability remains stable – 61 per cent of service providers report no change, while 26 per cent report a year-over-year improvement. Increased pricing competitiveness is a manifestation of tight market demand, increased competition for deals and more demanding buyers.
Spurred on by globalisation, technology and financial forces, outsourcing has gained ground as a strategic change initiative. With greater acceptance and implementation, buyers are beginning to grapple with how to manage and govern multi-provider/multiple outsourcing efforts. While many outsourcing contracts are still initiated at the functional or business unit level, both EquaTerra advisors and global service providers indicate buyers are beginning to establish multi-provider sourcing relationships at the corporate level in an effort to manage business case objectives better and measure RoI.
In recognition of potential overlap/integration issues, more buyers are taking the increased cost and complexity of employing multiple providers in overlapping functional areas into consideration when short-listing potential service providers.
Longer term, this trend could lead to more supplier rationalisation and consolidation to streamline and simplify sourcing and governance efforts. Bottom line, buyers should account for multi-provider/multiple outsourcing complexities upfront during the sourcing process for new outsourcing efforts.
“Over time, buyers will likely adopt a global, cross-functional or portfolio-based governance approach,” says Stan Lepeak, EquaTerra’s managing director of global research. “Developing and adopting standardised outsourcing governance operational models, investing more in skilled personnel and leveraging software tools to automate and improve governance operations will be central to achieving business case objectives for multi-provider outsourcing efforts.”
For insight into the global outsourcing market and a comprehensive discussion of BPO/IT advisor and service provider results, please register with firstname.lastname@example.org to attend EquaTerra’s 3Q Pulse Webcast on Tuesday, Oct. 28, at 3.00 p.m. (GMT). Presenters: Mark Toon, CEO of EquaTerra, and Phil Morris, managing director for EquaTerra in Europe and Asia Pacific.
About EquaTerra’s 3Q08 Pulse*
EquaTerra conducts ongoing research on a variety of topics relating to emerging markets, changing market conditions and demand for outsourcing. The company combines relevant recent research with trending data gathered through its quarterly survey of leading outsourcing service providers and its own client-facing advisors to create its Pulse report. For more detail or to obtain a copy of the Pulse survey, please contact email@example.com
EquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported over 2000 transformation and outsourcing projects across more than 60 countries. Supporting clients throughout the Americas, Europe, Middle East, Africa and Asia Pacific, we have deep functional knowledge in finance and accounting, HR, IT, procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions. For more information, please contact Melissa Gardiner at +44 (0) 845 838 7500; firstname.lastname@example.org; www.equaterra.com.
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