The Outsourcing Phenomenon Comes of Age | Article

SundialOutsourcing, once considered an arcane business practice, has reached the boardroom and beyond. Today top managers understand the applicability of outsourcing to their companies and recognize its value in myriad businesses. As this powerful tool sweeps across the North American business landscape and continues to expand globally, it is creating unprecedented value. And as the outsourcing phenomenon comes of age, evolving from powerful management discipline into a mature industry, its future looks brighter than ever.

One big reason for this is that the outsourcing business finally sees itself as the vibrant industry it is–one with its own standardized tools, software products, and services; with its own industry groups and associations, such as The Sourcing Interests Group; with its own forums, far-reaching trade shows and international conferences; and, of course, its own magazine–InfoServer–the premier online magazine about outsourcing.

Harvard Business Review has called outsourcing one of the most important management ideas of the past 75 years. A study of Fortune’s most admired companies in 1998 found that the most successful companies make extensive use of outsourcing to achieve breakthrough performance.

The numbers speak for themselves:

  • In 1996, American companies spent more than $100 billion on outsourcing.
  • In 1997, total European IT outsourcing alone was estimated at around $15 billion. That figure is expected to rise to around $27 billion in 2001.
  • Today, over 90 percent of organizations outsource at least one activity.
  • It’s estimated that by 2001, outsourcing expenditures will reach $318 billion.

Creating Value

To leading company decision makers, the inevitable question is no longer, “Should we outsource? ” but “How will we do it successfully? ”

Outsourcing is always-first and foremost-about creating value. Whether we’re addressing the improvement of information technology procedures or refining the details involved in business process outsourcing–from initial contract negotiation to contract renegotiation and overall service level management, as the outsourcing industry matures, it finds ever better processes to help implement procedures.

The rate of change in outsourcing is as striking as it is in computing. We never seem to be running fast enough, and we often can’t believe how quickly this business keeps growing.

Outsourcing practitioners, constantly striving toward improvement (if not for outright perfection) are constantly rethinking and retooling outdated systems. The industry is also developing more sophisticated methods to analyze its successes and failures.

Is it any surprise then, that it’s also finding new and more exciting ways to reward success?

As this burgeoning industry gains respect and momentum, those who ride its repeated waves of success–its leaders and contributors–are beginning to recognize one another’s contributions. Like the movie and television industries, with their annual Oscar and Emmy awards, the outsourcing business now, too, recognizes its stars and the value they help create.

For the past eight years, InfoServer has given Editor’s Choice Awards to honor successful outsourcing relationships between suppliers and customers, reporting on these awards to help educate readers about the ingredients that go into them. InfoServer recognizes outsourcing relationships that represent the best of the industry–relationships that are helping raise industry standards. (See our March 1998 issue for details.)

We’re Not Alone

Yet another program to recognize industry leaders has recently been announced. In early December PricewaterhouseCoopers, the world’s largest professional services organization and a leader in the non-IT BPO outsourcing movement and Michael Corbett & Associates launched The World Achievement Awards to be given to those business executives or academics who have advanced the theory or practice of outsourcing, helping companies improve performance, profitability, and shareholder value.

Why are the awards being presented to individuals rather than to companies? InfoServer asked PwC Partner Jagdish Dalal, Business Process Outsourcing. “Most companies will be using BPO to manage growth and change in the new millennium. In building our global practice, we’re drawing on the important contributions that many individuals have been making over the years–and we sincerely want to recognize them for their leadership and creativity in helping put this new model into action.”

As we all recognize, awards reward behavior. We at InfoServer hope these honors will encourage positive trends and high levels of professionalism in the outsourcing industry. Winners will be selected among those in the industry who have demonstrated the power of outsourcing as a management tool for organizational change, for competitive advantage, and for building shareholder, or stakeholder, value.

Without the strategic thinkers, innovators, motivators and foreward-thinking business leaders it has behind it today, outsourcing might have remained just another tool used to save the ox from the ditch? or another trendy late-century business process among many. Instead, it’s a triumphant and enduring phenomenon, one that will continue to add value to businesses worldwide for years to come.

How to Participate

InfoServer offers you, our respected readers, an opportunity to participate in the nomination process for the World Achievement Awards. So, please submit nominations of people you believe have made a contribution to the industry (nominations are due before January 8, 1999). You can fill out the electronic nomination form by visiting the PricewaterhouseCoopers website or the Corbett &Associates website.

Six finalists – three executives and three academics – will be selected by a distinguished panel of judges, with a winner also named from each category. They will be honored at a special luncheon at the 1999 Outsourcing World Summit, to be held at The Desert Inn Resort, Las Vegas, Nevada on February 24, 1999. The finalists will also be the guests of honor at a private Chief Executive’s dinner hosted by Fortune magazine on February 23, the evening before.

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