Multiple Factors Spur Outsourcing Growth | Article

people on spiralWhile it isn’t accurate to make global generalizations, the outlook for outsourcing growth during the coming year in regions around the world seems to be very positive, according to management at Michael F. Corbett & Associates. Michael Corbett, president of the consulting firm, observes, “Every region of the world and every country within every region is going to have its own unique positioning relative to outsourcing, but we are anticipating growth in the range of 25 percent for outsourcing.”

Technology and Customer Care

The reasons obviously vary, but one common driver of the rapid industry growth will continue to be technology. “I think technology will lead the pack because it continues to be such an important part of clients’ overall operations, and also because technology is so integral to everything else going on within the company,” Corbett explains. He also cites customer support and customer care as two more areas that will attract lots of attention. “Increasingly companies are looking to outside organizations who specialize in those activities to bring a lot of added value,” Corbett notes. He names both Microsoft and American Express as leaders who are setting industry standards in customer care and support.

Offensive and Defensive Strategies

Within the various geographic regions, labor, economic, and legal issues are likely to shape the direction outsourcing takes. In characterizing these trends, Corbett identifies two approaches. An offensive approach involves organizations that use outsourcing strategies to take advantage of opportunities in their markets by employing better, faster, and cheaper ways of doing business. The other approach is defensive, and usually involves organizations that outsource in order to achieve gains in cost control and organizational efficiency. Like other industry observers, he believes that the macro-economic forces, whether positive or negative, are likely to stimulate clients to seek outsourcing more during the coming year.

“In Europe,” Corbett notes, “the focus is coming around to information technology (IT), and I think that area will continue to grow in 1999. In other regions like South America, a lot of the focus is going to be on infrastructure and facilities, as well as support to multinationals.” Asia presents some unique issues as the economy struggles to regain stability. Some arrangements that were set up to satisfy regional market demands may have to be re-examined.

Growing Intimacy

Another continuing trend that is gaining momentum involves the changing nature of outsourcing relationships. “For the past two or three years outsourcing relationships have been getting more intimate,” says Corbett. Simply transacting a set of services is evolving into closer strategic alignments between clients and providers. Relationships are starting to take on more dimensions of strategic alliances and joint ventures, Corbett predicts. As evidence, he points to the recent announcement of the alliance involving BankOne, AT&T, and IBM.

The Big Get Bigger

The larger organizations are likely to continue their aggressive growth. Corbett likes large technology providers like AT&T, IBM, EDS, CSC and accounting giants Arthur Andersen and PricewaterhouseCoopers. Corbett also notes that there are a number of larger providers who don’t attract much publicity that are already providing services such as manufacturing and logistics and distribution. He envisions continued strong growth in these areas.

Along the lines of customer care and support, Corbett expects increased focus on every aspect of customer contact. Call centers and electronic commerce are high-growth sectors. “A lot of companies are looking at how they can use outsourcing to speed their ability to do business electronically both with their customers and their trading partners,” Corbett adds. Outsourcing is increasingly popular to drive those efforts. He notes that the Internet and intranet applications are generally part of a client’s offensive outsourcing strategy, in which organizations are using technology to reach their customers better and faster. “They are creating closer relationships with their customers, and with their suppliers,” says Corbett, and outsourcing is the fastest way to introduce these organizational innovations.

Maintaining Balance

An interesting development that follows the trend to closer, more intimate outsourcing relationships is the emergence of a scorecard that properly defines the results clients are looking for in the outsourcing relationship. “One of the largest issues we’re dealing with is not only how to communicate strategy and vision to the provider, but also how to keep the relationship on track,” says Scott Lever, Ph.D., Corbett & Associates. The idea of a balanced scorecard comes from the fact that sometimes there is a conflict or counterbalance between performance affecting cost and customer care. Lever says that companies have really started to think about developing an intuitive, qualitative process to develop measures that really get at the heart of what it means to be contracted to each other.

One way to create a balanced scorecard is to spend time with the ultimate end users of the service, along with the people on the vendor side and on the client side. The discussions can help generate an awareness of the kinds of service that will result in satisfied customers, and help identify how the services should be performed and measured. In fact, according to Lever, “many times the process of developing the balanced scorecard can make the vision clear for the client and provider, in a way that perhaps didn’t exist at the start.”

While it may seem to some that the more open, trusting, and less contract-specific outsourcing relationships might rely less on performance measures, it appears the opposite is true. By creating a balanced scorecard, both client and provider can wind up focusing on what really delivers satisfied customers.

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