This two-part series discusses how outsourcing is dramatically changing to bring more value and build stronger relationships between buyers and service providers.
Cliff Justice, Partner in KPMG?s Shared Services and Outsourcing Advisory practice, addresses the question: ?Is outsourcing dead???in an interview with KPMG?s head of Global Research for Management Consulting, Stan Lepeak.
Today?s game changer is ?about knowing what?s coming and being able to quickly capitalize on the next thing. ?Is your outsourcing relationship nimble enough? Or so rigid that you miss opportunities?
?Lepeak: ?So it sounds like executives should make outsourcing, or perhaps the use of Global Business Services, one of their own core competencies and not delegate it down to the ranks or to the procurement organization as a cost savings exercise; rather view it as one of the levers in their strategic portfolio.
Justice:? You raised an important topic, Global Business Services (GBS). The decision to outsource or insource is a matter of deployment tactics that should support the functional strategy which is ideally connected to the overall business strategy. CFO?s, CIO?s and other functional executives know this and many procurement groups today are equipped to execute on that. There are many strategic implications to outsourcing but to spend time on where outsourcing should sit on the CEO radar misses the point.
Global Business Services, partially outsourced or not, connects the functions under unified processes and creates a more agile services organization with a holistic view of the business. For example, one of the biggest topics we are dealing with today is ?Big Data.? In other words, how can a company take all of the data available from their internal systems, social media, and a massive increase in cloud based mobile computing, and create meaningful insight reliable enough to make decisions and provide a competitive advantage? It doesn?t help to be predictive if the business is stuck in a model that is slow to respond. But becoming both predictive with the ability to execute quickly is a ?game changer? and why GBS is on the CEO agenda. The ability for outsourcing providers to help enable these models naturally raises the importance of the partnerships to the executive level.
Lepeak:? As the role of outsourcing evolves and as the third-party services relationships become more strategic, does that change the mix of service delivery models?
Justice: ?There?s really no one size fits all. The level of maturity that an organization has and their ability to deliver services and manage risks, as well as their business priorities will determine the mix of services. The question is not about outsourcing, but taking into account all capabilities within the business as well as outside the four walls. The entire global supply network of services must be considered, whether it is third parties, technology, or internal capabilities, and aligned under a strategic framework for the business.
Lepeak:? If I want to use outsourcing as a partnership to gain a competitive advantage, how do I manage these relationships? How do I enter into new relationships, whether that is with an outsourcer, or a cloud provider, or someone in between?
Justice:? That?s a great question. Using outsourcing as a means for competitive advantage is another form of partnership. It?s another form of an alliance. Synergistically leveraging the capabilities of a service provider to enter into new markets, seeing them as more than a vendor to provide a service, is what defines a strategy for competitive advantage through a partnership.
Just as you would look at a business alliance to sell a product, companies are seeing their partners in their supply chain in a different way. They are looking at the partners in a way that can help them support entry into new services and markets, and develop new technologies that they wouldn?t have the capability to do otherwise.
Lepeak: ?As clients demand that service providers become more strategic and start to view them as more of alliance partners rather than vendors, is that going to lead to a shakeout in the market on the service provider side?
Justice: ?I think we?ve seen a shakeout of sorts over the past two-to-three years. We?ve seen companies that have grown and excelled in their space. They have aligned by industry and they?ve moved up the value chain in their clients? organizations. They are offering more services, beyond traditional outsourcing, to their clients to help them compete. These services typically give the client an edge via technology or access to new markets and customers.
It?s not going to be easy. The challenge for executives is to govern a complex organization and a complex network that can deliver agility, speed, and access to talent and innovation so that the organization is able to solve its biggest problems.
Lepeak:? It?s a big challenge with big potential rewards and big penalties for failure. We will talk further with Cliff about some of the strategies and tactics to solve some of these issues. Thank you, Cliff for joining us today. Until next time, happy sourcing.
For more on Global Business Services, visit the KPMG Shared Services and Outsourcing Institute.
And to receive the latest insights from KPMG, join the KPMG Institutes at http://www.kpmginstitutes.com/Admin/createaccount.aspx. Be sure to customize your profile by selecting ?Shared Services? and ?Outsourcing? along with other interest areas.
Source: http://blog.equaterra.com/2012/10/the-obsolescence-of-outsourcing-part-2-getting-to-innovation/
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