In a survey of 177 Canadian executives, IDC Canada of Toronto, Ontario reports that business transformation outsourcing (BTO) is the major driver in choosing to outsource. Sponsored by Accenture-Canada of Toronto, Ontario, the report, Outsourcing--Shared Risks and Shared Rewards, reflects a strong movement among Canadian executives to rethink their approach to changing how their organization thinks, acts and operates.
Accenture defines BTO as "a program to transform the way in which a business works by using outsourcing to achieve a rapid, sustainable, radical improvement in performance across the entire enterprise."
Blake Hanna, a partner, communications and high tech practice for Accenture-Canada, reveals this astonishing finding: "Ninety-five percent of the respondents said they plan to use outsourcing to drive change into their organization." The figure below reflects the expectations of the executives in outsourcing facilitating change.
"The study showed that people do want a fair degree of change. They are not going far enough, fast enough," without it, reports Jason Bremner, program manager, outsourcing services, for IDC Canada. Enterprises are turning to an outsourcing relationship because the outdated means of doing things is not working fast enough to deliver needed significant business improvement.
Bremner continues, "The correlation between outsourcing and transformation is very important. They can get there a lot quicker and they want that to happen. There is a recognition that they need to do it now."
Companies today have to deliver results in a shorter time frame and must look at doing business differently, according to Hanna. "Insanity is defined as doing the same thing over and over again and expecting a different outcome. Business transformation changes that. We are finding that expectations to improve business outcome is becoming more of a challenge for the executive team of organizations."
Outsourcing Connects the Dots
One of the major areas that needs BTO is IT, ironically the first area companies historically outsourced. While individual departments and functions have traditionally had expertise in their specialization, IT systems to support them often became disconnected. Departments and functions frequently became isolated.
Bremner addresses the isolated communications. "As companies grow and change, things change at the micro level but may not happen at the cross-functional level. This leads to systems that don't communicate between departments. Outsourcing puts energy in the right areas and removes redundancy of multiple functions with a holistic viewpoint," he says.
The widened horizontal disconnect between departments has reduced agility in a rapidly accelerating business environment. This is further exacerbated by IT not being a core competency of most departments. Outsourcing is a way to bridge the disconnect by merging technology with business objectives.
Hanna points out, "Organizations have managed, despite their efforts, to stovepipe. The challenge internally is to assemble a multi-disciplinary team, and this is where the outsourcer comes in. It is the ability to bring together this capability that is very difficult to do internally. By leveraging the capabilities of the provider, there are capabilities never dreamed of in the past."
Bremner explains that the processes are only as strong as the weakest link in the chain. "The system dynamics are not just equipment. There are people, processes and technology involved that need to work simultaneously and congruently. If one of them is out of sync, the entire system breaks down. The outsourcer can take over that process with commitments to deliver."
Relinquishing Control for Improved Outcomes
In the past, one of the inhibitors to deciding to enter an outsourcing arrangement was the issue of control. The perceived loss of control was a major concern. Enterprises have shifted their view to allow outsource providers greater latitude in how things are done, according to the survey.
Hanna observes, "Organizations want to have the accountability and responsibility for charting the future, setting the strategy and defining the business outcomes. They are less concerned about having control of the management of the functions. There is an increasing sense that organizations need to set the direction and give the teaming partner much more latitude in how they accomplish those business outcomes." As illustrated in the figure below, control concerns are now greatly reduced.
The study showed that for the first time Canadian companies want the provider "to take a strategic role," Bremner observes. Bremner notes that handing processes off to an outsource provider with specific expertise allows the enterprise to focus on its core business.
Oliver Chow of Everest Canada based in Toronto, agrees that Canadian companies now are willing to include BPO processes in their outsourcing initiatives to achieve a great magnitude of change. "They started out looking at IT, but now are willing to look across the entire organization," he observes.
Hanna concludes that business has a new focus. "It is not just about cost reduction. It is about improving business capabilities. Managing transformational outsourcing is quite a different skill set than you have in-house."
Next month, in part 2, I'll discuss the report's findings on the new trend of sharing risks and rewards in Canadian outsourcing engagements.
Lessons from the Outsourcing Journal:
- Canadian companies outsource for business transformation to modernize and increase efficiency. Outsourcing provides needed change that cannot be often accomplished internally.
- Day-to-day control over outsourced activities is no longer a significant issue for the majority of Canadian organizations. Instead, they are looking for a strategic partner.
- Outsourcing can bridge the horizontal IT disconnect between departments to eliminate redundancy while increasing communications and business agility.