noa outsourcing yearbook 2015

NOA Year book 2015 aw.qxp_ark 10/04/2015 10:02

Contents

4 Events calendar6 Review of 201416 Industry insight28 Predicitions42 Case studies50 Outspoken outsourcers58 Outsourcing Directory

Welcomefrom the CEOWelcome to the 2015 edition of the NOA’s annual Outsourcing Yearbook. This issue featuresa variety of opinions, predictions, studies and showcases, along with essential best practiceadvice, statistical analysis and expert thought leadership. Professionalising the outsourcing industry has always been a high priority for the NOA andit is one of the more prominent themes in this Yearbook. The industry is finally beginning toshed its negative reputation of yesteryear – this can only continue if the personnel involvedare trained correctly, and we see it as the NOA’s mission to grow the reach and positivereputation of outsourcing through promoting best practice globally.

Professionalisation on a Corporate LevelBuyers of outsourcing come in all shapes and sizes, yet they all need similar proficiencies inorder to achieve outsourcing excellence. Last year, the NOA introduced its CorporateAccreditation Programme to help companies recognise this. We also did it because thosethat are excellent deserve to be recognised! The Accreditation Programme has beenheralded as a cost effective way to locate those hard-to-find problems and solve them,allowing stakeholders and investors to sleep easier at night. Head to page 12 for moreinformation.

Continuous Professional DevelopmentHowever, the buck doesn’t stop with the executives. Every individual should be doing his orher bit to ensure that organisations manage their outsourcing as well as possible. Capita is aprime example, having demonstrated its commitment to individual development by rollingout an NOA ‘Excellence in Outsourcing’ qualification across its service delivery teams. CPD is the next logical step - the practice facilitates personal growth and optimises thebenefits attained from every learning opportunity. Now that the NOA has launched its ownCPD scheme, these benefits are available to outsourcing professionals everywhere. Wefirmly believe that if every individual involved in outsourcing practised CPD, the industrywould reach unprecedented levels of professionalism.

Ethics and Codes of ConductThe hype surrounding this year’s general election has brought public sector outsourcing tothe forefront of the public eye. UK citizens want more ethics and transparency inoutsourcing, and who can disagree with them? The NOA has long campaigned for thepromotion of ethical outsourcing management and delivery; our research into ‘value beyondcost’ demonstrates that buyers appreciate supplier transparency just as much as the public,if not more so.

Value beyond CostThe same research goes on to offer brand new insight into what companies are looking forwhen they outsource and how the perceptions of the buy and supply-side differ, making it amust-read piece in this year’s edition. You’ll find it on page 18. In short, this issue offers a comprehensive guide on how to succeed in outsourcing. Youcan get involved by joining our existing professional development programmes, orsuggesting new ones that the NOA could provide. Otherwise, just watch this space! I sincerely hope that you enjoy this year’s Yearbook – welook forward to working with you in the future.

Kind Regards

Kerry Hallard, CEO, NOA

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Published by EOA Ltd in associationwith the National OutsourcingAssociation andwww.sourcingfocus.com.44 Wardour Street, London W1D 6QZ

Editorial:Glenn Hickling, Jeremy CowardBusiness Development:Natalie MilsomOutsourcing Directory:Aine McEvoyCreative and Design:The Ark Design Consultancy LimitedImages:www.123rf.comPrint:Tyson PressMany thanks to all our sponsors andcontributors.©EOA Ltd. All rights reserved.

Kerry Hallard CEO, NOA

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2015 NOA Events CalendarNOA Events

Outsourcing is collaborative by nature, so it makesperfect sense to come together to learn from each other.NOA events & training workshops cater for buyers,suppliers and advisors alike, building a community thatprides itself on the sharing of knowledge anddevelopment of best practice.

Being committed to professional development for thosein the outsourcing industry the NOA offers a wide variety

of event topics and formats.

Take a look at our events calendar below for the first halfof the year to find out which is perfect for you.

To register for any of the below or for further detailsplease email [email protected] or visit the noa website,www.noa.co.uk.

Date Type Title Location Fees excluding VAT

APRIL

22nd April Breakfast Club Digitalisation in Outsourcing London Corporate members – FREE Individual members - £150 Non Members – N/A

28th April Special Interest Customer Experience London Corporate members – FREE Group Individual members - £150 Non Members – N/A

28th & 29th April Two Day Intensive London Members - £990 Workshop Non Members - £1089

MAY

13th May Afternoon Club Outsourcing Contract Perfection Manchester Corporate members – FREE Individual members - £150 Non Members – N/A

21st May Awards Ceremony Professional Awards London 10% discount for all members

JUNE

24th June NOA Symposium NOA Symposium London 10% discount for all members

SEPTEMBER

16th - 17th Sept Awards Ceremony EOA Summit and Awards Lisbon, Portugal 10% discount for all members

NOVEMBER

19th November Awards Ceremony NOA Awards London 10% discount for all members


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It’s been a busy year for the NOA andthis section pays reference to our mainactivities and applauds those thatcontributed in 2014


7

Review of

2014NOA Year book 2015 aw.qxp_ark 10/04/2015 10:03 Page 7

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Review 2014

EOA Awards 2014• European BPO Contract of the Year

Conectys

• European IT Outsourcing Project of the YearHCL & AstraZeneca

• European Outsourcing Service Provider of the YearTeleperformance

• European Outsourcing Advisory of the YearEversheds LLP

• Offshoring Destination of the YearFiji

• Award for Corporate Social ResponsibilitySPi Global - SPi for Visayas

• Award for Innovation in Pan-European OutsourcingTeleperformance - CX Lab

• Outsourcing Works – Award for Delivering Business Value in European OutsourcingITC Infotech & Danske Bank

• European Outsourcing Professional of the YearWilliam Pattison, Chief Executive Officer, Mindpearl BPO

• European Outsourcing Buyer of the YearZiggo & TechMahindra

Our award winning entrants!The NOA organises three types of major award ceremonies each year;

• EOA AwardsCelebrates excellence in pan-European outsourcing. Rewards buyers, suppliers, advisors and destinations from all over Europe

• NOA's Professional AwardsDedicated awards ceremony that celebrates the individuals and teams that add most value to their companies, their partners and the global outsourcing industry

• NOA AwardsOur largest award ceremony that rewards innovation and pioneering best practice by suppliers, buyers and advisors. Now entering its twelfth year, it is firmly established as the awards all outsourcers want to win

These ceremonies provide the perfect opportunity to recognise you, your colleagues, your team and yourorganisation amongst the elite of the outsourcing industry.

Here are our winners from 2014…


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Review 2014NOA’s Professional Awards 2014• Outsourcing Rising Star of the Year

Anthony Day, Partner, DLA Piper

• Outsourcing Professional of the Year John McKinlay, Partner, DLA Piper

• Award for Academic Achievement Philip Allery, Founder, Prescience Outsourcing Limited

• Award for Personal Development in OutsourcingTina Rizzo, Head of Service Integration, EE

• Best Relationship Management TeamAviva

• Best IT Outsourcing Team Miratech

• Best Finance & Accounts Outsourcing Team Parseq

• Best Outsourced Customer Service Team Firstsource & giffgaff

• Best Business Process Outsourcing Team Firstsource & giffgaff

• Best Offshored TeamNashTech

• Award for Skills Development Programme of the YearBPeSATata Consultancy Services BPS

NOA Awards 2014• International Contract of the Year

CSC and Zurich Insurance Group

• Offshoring Project of the YearTelefonica and Capita

• Offshoring Destination of the YearSri Lanka

• Telecommunications, Utilities and High-Tech Outsourcing Project of the YearFirstsource Solutions Ltd and giffgaff

• Public Sector Outsourcing Project of the YearCapgemini UK and the Environment Agency

• Financial Services Outsourcing Project of the YearHerbert Smith Freehills LLP and TSB Bank plc separationproject

• Best Contribution to the Reputation of OutsourcingKPMG LLP (UK)

• Award for Corporate Social ResponsibilityTeleperformance and Citizen of the World (COTW)

• BPO Contract of the YearSerco and De Vere

• ITO Project of the YearDeloitte

• Award for Innovation in Outsourcing Parseq and Metalcashcard Ltd

• Shared Service Centre of the YearSteria - NHS Shared Business Services

• Outsourcing Advisory of the YearSlaughter and May

• Outsourcing Contact Centre Provider of the YearConectys

• Outsourcing Service Provider of the YearHCL Great Britain LtdMidlandHR

• Outsourcing Buyer of the YearBBC

• Outsourcing Works - Award for Delivering Business ValueTechMahindra and GlaxoSmithKline

Details on how to enter the 2015 award ceremonies can befound on our website www.noa.co.uk

NOA’sPROFESSIONAL

AWARDS


10

Review 2014

NOA StudentsWe would like to congratulate all the below 2014 NOA students for completing their professional developmenttraining and outsourcing qualifications.

Name Job title Company

Diploma GraduatesAlison Haigh Head of Procurement UKARGlenn Quadros General Counsel, Enterprise Unilever

Technology SolutionsJames Power Procurement team UKARMartin Edwards Business Consultant InfosysMike Sheppard Deputy Director of Facilities Lancaster

UniversityPip McKenzie Major Transactions & Unilever

Outsourcing Legal Counsel at Unilever

Tiago Caterino RUMOS

Professional CertificateAdam Crisp Supplier Change & Process Aviva

Improvement Manager Alison Rust Contracts Administrator AvivaAnne Stephenson Outsourced Risk & Oversight Aviva

Manager Samantha Kelly AvivaSimone Hammer Content Delivery Manager - Thomson

Offshore Operations ReutersSue Midgley Supplier Performance Manager Aviva

Foundation CertificateAileen O'Connor Senior Compliance Manager Ulster BankAmie Robinson Sourcing Consultant ZurichAndy Bailey Standards Manager ZurichAnita Fernqvist Head of Central Operations ZurichArder Carson Ulster BankArron Quinn Retail Ops, Service Manager Ulster BankCarrick McDougall UKGI Offshoring Manager ZurichChristine Davey Business Architecture, COO Ulster BankDaniel Scotford Service Management ZurichDavid Crowton Relationship & MI Consultant The

Phoenix Group

Derek McWhinnie Sourcing Consultant ZurichDes Murphy Senior Risk Manager, Ulster Bank

Corporate Dominic Watson Outsourced Services, Ulster Bank

ConsultantDonna Lovewell UK Sourcing Manager Zurich

Name Job title Company

Ed Van Dreumal Ulster BankGareth Fegan Strategy & Architecture COO Ulster BankGreg Simpson Business Ops Manager, GR Ulster BankHitesh Patel Governance Specialist Zurich

Service Management Ian Hurst Sourcing Consultant ZurichJenny Shiret Standards Consultant ZurichJoanne Mac Donald Ulster BankKaren Vickers AML Service Manager Ulster BankLina Hariri Sourcing Consultant ZurichLouise Mechelen Standards Co-ordinator ZurichMarie Caroll Senior Risk Manager, Ulster Bank

Corporate Mark Rosa IST IT & S Graduate - BP

Vendor ManagementMary Fraser Governance and Contract Zurich

Administrator, Vendor Management, Sourcing and Procurement, Group Operations

Maureen Verdon Ulster BankMichelle Garrigan Service Manager, GTS Ulster BankMike Wood Sourcing Consultant ZurichNatalie Yates Thomson

ReutersPaul Birkin Segment Vendor Manager BPPaul Dyer Sourcing Consultant - Zurich

Finance and InvestmentsRohit Sarin Segment Vendor Specialist BPRory McClurg Controls Relationship Manager, Ulster Bank

RMSU Rosin O'Reily Service Manager, GTS Ulster BankSam Coventry Delivery Manager, HR Ulster BankShane Davis Retail Ops, Snr Implementation Ulster Bank

Manager Stephanie Clark Governance Manager, Zurich

Vendor ManagementStephen Durnin Corporate Casualty Underwriter ZurichSue Harrison ZurichTessa Jones Print and Communications Zurich

ManagerTom Beach Team Manager EDFTrevor O'Gorman Sourcing Consultant ZurichTrish Rogers Standards Manager Zurich


Talent is the outsourcing

industry’s number one

concern.“”We offer a range of training programmes and

industry qualifications, for professionals operatingat all levels.

Whether you need a skilled outsourcingprofessional or wish to become one, the NOA is the leadingbody for developing the outsourcing profession and industry.

To find out more, contact [email protected] or call 0207292 8686. www.noa.co.uk/professional-development/

Join the industryelite and sign upfor the 2015Spring Diploma in Outsourcingtoday

NATIONAL OUTSOURCING ASSOCIATION


OSYB: Why has the NOA developed a corporateaccreditation programme?

KH: We have spent the best part of two years developing ourcorporate accreditation programme as a part of our ongoingcampaign to professionalise the outsourcing industry. Ouraccreditation programme complements our existing portfolio ofqualifications for outsourcing professionals.Users of outsourcing services frequently ask us: are theyworking to outsourcing best practice? How do they know if theirservice providers are guiding them to best effect? Are there anyshortfalls in the management of their outsourcings that could beimproved to deliver better results?Although there are some emerging standards in outsourcing, allof which the NOA has been involved with, these have needed tobe broad reaching and are generally non–prescriptive, as suchthe NOA has developed its accreditation programme to sitabove these emerging standards and which is focused on thematurity of an organisation‘s processes across all stages of theoutsourcing lifecycle model.

OSYB: Why would a company want to undertake the NOA’saccreditation programme?

KH: Benefits are manifold, but predominantly, users ofoutsourcing services will: gain understanding as to how wellthey compare to industry best practice; go on a journey ofimprovement towards outsourcing best practice, which will yieldincreased value in terms of cost savings and/or service

improvements, etc.; gain recognition for their outsourcingcompetency and maturity; assure stakeholders of theircommitment to the delivery of best practice, to include theBoard, shareholders and customers.

OSYB: What is accredited?

KH: The NOA’s accreditation programme has been developedto be flexible to cater to the huge variety of companyrequirements. As such, the accreditation can be the company-wide approach to outsourcing, that of a division, for a particularbusiness function or for a standalone outsourcing project. Asour accreditation programme is based on our Lifecycle Model,companies can also choose to be partially accredited for theirpractices in just one stage of the Lifecycle Model, for a coupleof stages, or achieve full accreditation for all four stages!

OSYB: What’s involved in undertaking an NOAAccreditation?

KH: The first stage of the accreditation process is to completeour Outsourcing Lifecycle Assessment Level 1, which is hostedonline and is free of charge for members. A fifteen minutequestionnaire will quickly assess your outsourcing maturitylevel, measured against the NOA’s own best practice standards(there’s a secret algorithm embedded within). The resultingreport will give the user an overall maturity report, as well ashighlight specific areas for development.

After completing this stage, companies can choose to reflect

12

Review 2014

Spotlight on the NOA’s CorporateAccreditation ProgrammeThe Outsourcing Yearbook caught up with Kerry Hallard, CEO of the NOA to learnmore on the Association’s latest programme for improving performance in outsourcing


on their performance and develop their own journey ofimprovement or alternatively embark upon a programmetowards NOA accreditation.

OSYB: So what’s involved in the journey to NOAAccreditation?

KH: There are 3 main stages to NOA corporate accreditation.Put simply these are:1. Accreditation Readiness Assessment2. Performance Improvement Programme3. NOA Accreditation Audit

Accreditation Readiness AssessmentCompanies or divisions keen to embark upon NOAAccreditation need to sign up to NOA’s accreditationprogramme. Upon enrolment, each company will be given threethings:

1. The first stage is to assign a project manager to lead thisaccreditation programme for the company, who will beresponsible for involving all necessary participants at thedifferent stages of the programme. The project manager will begiven an information pack and access to a webinar detailing theaccreditation programme, how the NOA will assess and trainingon how to use the software.

2. Working with your project manager, the NOA will help set thecompany up on the Outsourcing Maturity Assessment softwareplatform and assign appropriate controls across the designatedusers. The software collates and contrasts views of differentindividuals/teams, and even the views of suppliers if so desired,across level 2 of the Outsourcing Maturity Assessment todeliver a solid and objective picture of company-wideperformance. By highlighting areas of weakness, the platformfacilitates deep dives to help the company understand where itneeds to improve performance. The software can be configuredto the specific needs of the client company, by refining andtailoring the questionnaires accordingly.

3. The NOA, or a NOA accreditation partner, will host a one-dayworkshop with the company to assess performance and whatneeds to be done to work towards achieving NOA accreditation.

Performance Improvement ProgrammeThe Accreditation Readiness Assessment process will provide adetailed report on performance against NOA’s standards. Armed

with this information, the client company may choose any of anumber of routes forward, to include but not limited to:• Embarking upon a journey of improvement themselves• Working with an NOA accreditation partner, or partner of theirown choice, on a journey of best practice improvements to beaccreditation ready• Immediately undertake the accreditation AuditClient companies will need to continue to use the software toassess performance, though after the initial period of threemonths, there is a quarterly license fee to continue to use thesoftware.

NOA Accreditation AuditWhen the company is ready, the NOA will go in and undertakethe Audit process. In preparation of the Audit the NOA willreview performance recorded in the software programme andwill request specific evidence in advance. The audit itself willordinarily take one day on site, interviewing different teammembers and requesting different evidence from each, but thisvaries depending on the scope for the accreditation audit. Within one week of the audit taking place the NOA willannounce the level of accreditation achieved: Competent orExcellent (there is another level: Foundation, which is not anaccredited level).

Companies will be given detailed feedback as to why theyachieved the level they did and recommendations of whatneeds to be done to achieve the next level. Companies cancontinue to move up the accreditation level over time if theyso wish.

OSYB: How long does accreditation take?

KH: The time the process takes really depends on thecompany’s alignment to best practice. Some companies will beready to go straight to accreditation audit and achieve it within 3months, others may need to go on a significant journey ofimprovement.

The Accreditation is valid for three years when companies areinvited to undertake anaccreditation refreshmentprogramme.

OSYB: What’s coming up nextfor the Accreditationprogramme?

KH: We have been pleasantly

13

Review 2014


surprised by interest in accreditation from suppliers, as such weare reworking the embedded templates and the processes towork for the accreditation of suppliers. Watch this space.During the preparation for accreditation, the data input by allusers will be aggregated and analysed anonymously to form anindustry wide picture of performance against best practice.Sectoral analysis will be published periodically by the NOA todrive industry performance.

If you are interested in corporate or project accreditation pleasecontact the NOA to receive a free link to the initial OutsourcingLifecycle Assessment, or to arrange a call about the fullprocess.

If you are a consultant or advisory and are interested inbecoming a NOA Accreditation Partner, please contact Chris Halward at [email protected].

NOA’s Lifecycle model. Companies can be accredited on justone stage of the Lifecycle model or the full outsourcing lifecyclemodel.

Review 2014

Your AssessmentStage 1 - SL Strategic Leadership

SL-01 Executive sponsorship recognition of drivers and constraints Inadequate Informal Consistent Adaptable Optimised

SL01-01 Create a Senior Leadership Team to sponsor the initiative ! ! ! ! !

SL01-02 Appoint key stakeholders to form an Executive Strategy ! ! ! ! !

Team to ensure alignment

SL01-03 Determine prioritise and agree with Executive Strategy ! ! ! ! !

Team the drivers for outsourcing

SL01-04 Study understand and agree with the Executive Strategy ! ! ! ! !

Team the organisational constraints and their impact on the capability of the organisation to outsource

SL-02 High level strategy and governance framework Inadequate Informal Consistent Adaptable Optimised

SL02-01 Determine the high level strategy for outsourcing ! ! ! ! !

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15


How can buyers and suppliers bringadded value?

16


17

Industryinsight


Executive SummaryCreation of added value is moving to central importance interms of delighting outsourcing clients. As contemporary buyersleave behind the old school ‘your mess for less’ attitude anddemand much more from their partners, the NationalOutsourcing Association and Polaris conducted a poll to delveinto the key influencers, indicators and drivers of added value inoutsourcing. The results were highly encouraging. It is clear that the vastmajority of those who participate in outsourcing are convincedof its value, with a significant percentage of buyers certain thatthere is more value to outsourcing than simply cost-cutting.Despite this, many buyers are not confident in their ability toassess how well their partners are performing, which is highlysurprising in this age of data analytics and performancetracking. Buyers are also suspicious when their suppliers offer‘innovation’; the ability to innovate is always desirable, but thereappears to be ongoing confusion between buyers and suppliers

over what innovation actually is. Buyers and suppliers unsurprisingly agreed that a strongrelationship founded on trust is a vital component in goodoutsourcing. However, a strong outsourcing relationshiprequires aligned beliefs and objectives. While buyers andsuppliers were aligned on value-adding activities, commercialconstructs and reasons for outsourcing, there’s discordbetween the two parties regarding performance assessment,delivering value, sharing risk, cost-reduction and more.Suppliers are often guilty of adopting a more ‘rose-tinted’perspective than their buyers. Nevertheless, the future looks positive for both sides, with themajority of buyers expecting to expand their outsourcing overthe next five years. This may be connected to the rise ofoutcome-based contracts, which should allow both buyers andsuppliers to attain more certainty regarding the success of theiroutsourcing activities.

18

Glenn HicklingIndependent Writer

Industry insight

NOA Research - value beyond costHow can buyers and suppliers bring added value to their outsourcing relationships? The questionnaire thatNOA members were provided with was designed to reveal how successful their outsourcing is, where thesuccesses and flaws lie, and what their aspirations for the future are. The aim was to ascertain not just howimportant added value is, but what those involved in the outsourcing marketplace are doing to make it work.

It is well known that the best outsourcing relationships are founded on aligned goals and expectations.Hence why another key objective of the research was to find sympathies and disconnects among buyer andsupplier attitudes: buyers were asked their view, and suppliers were asked what they thought theircustomers are thinking, both in terms of their current picture and their plans for the future.

This report documents the results. It provides a comprehensive picture of the outsourcing industry’s state,where it’s likely to go and what changes are necessary. The analysis should serve to provoke further thoughtand discussion regarding the report’s findings.

Enjoy!


Key Findings• 92% of buy-side professionals agree that outsourcing delivers business value, with 61% strongly agreeing. 81% believe that engaging outsourcing suppliers has made their company more competitive (56% strongly)• Over a third of buyers (36%) turn to outsourcing providers primarily to improve services • There is a misconception on priorities in performance assessment, with significant dissonance on the importance of indicators of success: - For buyers, the most pertinent factor is increasing productivity/outputs - 47% of buyers listed this as their #1 indicator, and 32% as their second - Just 23% of suppliers are aware that buyers use increased outputs as the key barometer of outsourcing success (suppliers only rank increased productivity as the fifth most important indicator) • Confidence in assessing performance is not optimised: -83% of buy-side outsourcing functions claim to be confident in assessing how well their partners are performing- However, just 4% of buyers profess absolute unequivocal confidence in doing so• There is a general trend for suppliers believing things to be going better than their buyers do: on average, suppliers perceive clients to be benefiting 9% more than clients themselves believe they are • A significant disconnect exists over the use of performance targets for business outcomes as a risk sharing measure:- 63% (roughly 2 in 3) of suppliers state that business outcomes feature as part of the deal- But just 1 in 4 buyers claim that such measures are in use • The most popular way for buyers to design a contract is around outputs: 47% of deals are currently structured this way. • Over the next three years, buying outputs could be usurped by outcome-based contracts: - 34% of buyers are using them frequently- 36% are planning to use them more- By 2017 the majority of new contracts could be constructed around business outcomes • The topic of “innovation” does not currently appear to be delighting buyers - “innovation” is running at a “success perception” deficit of 31% • Just 14% of buyers rate innovation labs as a useful investment into an outsourcing relationship • Financial rewards for success are built into less than half of contracts: 39% of buyers and 45% of suppliers reporting that such incentives are locked in to their deals • The future looks positive for outsourcing as the majority of buyers plan to increase the scope of their outsourcing (59%),

with just 7.8% considering scaling back activity

Objectives and Methodology Partnering with Polaris, the NOA surveyed 158 of its memberswith a detailed questionnaire designed to illicit expert opinionon matters such as commercial constructs, performancemeasurement, and governance and risk sharing techniques. Each participant was asked to clarify whether they are a buyeror supplier of outsourcing, which sector they operate in andhow many years of outsourcing experience they have. Fromthere, buyers and suppliers answered two separate lists of 14questions: buyer questions focused on what their partners areproviding them with, while suppliers were quizzed on what theythought their buyers are receiving and what they are expecting.The survey sample consisted of many highly experiencedprofessionals, with 71% of buyers and 74% of suppliers havingmore than 5 years’ experience in outsourcing. Roughly one third(35%) of buyers surveyed have more than 10 years’ service,compared to 56% of suppliers.

Part One: How Effective Is YourOutsourcing?Outsourcing Delivers Value and Boosts Competitive Edge

A landslide majority of buy-side professionals, 92%, agree thatoutsourcing delivers business value. 61% of these membersstrongly agree. 81% believe that working with outsourcing suppliers hasmade their company more competitive, with 56% agreeingstrongly. Although most buyers are happy, there remains a 31% gap inperceptions of “value” and “great value,” and a 25% gap interms of how much of a competitive boost outsourcing brings.

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Industry insight

Agree (92%)

Strongly agree (61%)

Disagree (8%)

0% 20% 40% 60% 80% 100%

Outsourcing delivers business value (Buyers)

Agree (81%)

Strongly agree (56%)

Disagree (19%)

0% 20% 40% 60% 80% 100%

Using outsourcing suppliers makes our companymore competitive (Buyers)


Concurrent Cost Cutting and Service Improvement isBecoming the New Normal

Only 54% of buyers state that reducing costs is their numberone driver. 36% of buyers now choose outsourcing primarily toimprove their services. The supplier view is similar: 56% of suppliers reason that theirbuyers are mainly looking to cut costs on their bottom line, but27% consider their clients to be mainly choosing outsourcingfor the purpose of improving services. So it would seem that, while buyers certainly want it better,they still want it cheaper too…and who can blame them? 17% of suppliers believe they are being selected for benefitssuch as cutting edge technology, better talent and processesetc., compared to 11% of buyers citing this reason. It could be argued that clients are more interested in endresults than the alchemy that goes into achieving them, which isa sign of a progressive industry where trust in suppliers isgrowing.

How is Performance and Value Assessed?Buyers and suppliers were asked to rank their top 3 measuresfor evaluating outsourcing performance, where 1 indicated theirmost used measure.

The first significant dissonance in the survey comes in the formof incorrect assumptions of how buyers like to evaluate anoutsourcing deal’s performance. For buyers, the most pertinent factor is an increase in

productivity/outputs - 47% of buyers listed this as their #1indicator, and 32% as their second. Suppliers only ranked “increased outputs” as the fifth mostimportant indicator, with just 23% of suppliers aware thatbuyers use it as the key barometer of outsourcing success. Cost reduction remains an important metric. 56% of supplierssuppose it is the #1 KPI, compared to just 24% of buyers. Buyer and supplier returns were almost identical on the topicof customer surveys, highlighting a 360° awareness of the roleoutsourcing plays in delighting consumers/ultimate end users. These statistics all point towards a buy-side culture of qualityover cost, but the difference of opinion in the vitality ofincreased outputs needs to be addressed. Reductions in inputs, improved outputs and positive staffuser surveys are all important to buyers, but none more so thanthe boost to productivity once the outsourcing deal beds in.

Confidence Levels in Assessing Performance83% of buy-side outsourcing functions claim to be confident inassessing how well their partners are performing, but a mere4% profess absolute unequivocal confidence in doing so. 1% of buyers are really unconfident, with a further 16%admitting that their confidence levels in performanceassessment are less than desired. From a supplier perspective, 88.5% are confident their effortsare being accurately appraised, with just 3.8% suggesting thattheir clients are not confident in their own ability to measuresuppliers’ performance.

20

Industry insight

Reduce costs

Improve services

Access othervalue-add benefits

0% 20% 40% 60% 80% 100%

Prime drivers for outsourcing

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A smaller survey, conducted during a plenary session at theNOA Symposium 2014, posed this question to the audience:

Service improvement is a top priority for both buyers andsuppliers. What do you think is the main inhibitor to this?

43% of attendees answered that contracts are structuredaround headcount rather than service30% blamed the lack of simple methodology to measureservice improvement15% called for higher levels of expertise12% said that it is not in suppliers’ interest as it may reducebusiness volumes


Ranking the Value Adders

There is much agreement on the most important value-addingactivities: service improvements, increased ability formanagement to focus on core activities, better productivity andheightened end-client satisfaction are considered absolutelyvital on both sides of the deal and make up the lion’s share ofboth top five rankings. At the other end of the scale, revenue generation andestablishing flexible HR models are not considered among themost important desirables, with only 50% of buyers citing themas important. One difference of opinion concerns the amount of revenuegeneration clients expect their partners to create: supplierssuppose revenue generation to be 10% more important than itactually is to clients.

The data highlights perception gaps in terms of how important avalue-add benefit is, and how well it had delivered benefits. For example, service improvement is weighted with animportance of 4.29/5 for buyers. Its average delivery of businessbenefits rating of 3.32 indicates a 22.6% success perceptiondeficit, i.e. it is delivering, but not in line with how important it is. For buyers, all listed benefits were in success perceptiondeficit, with an average of 17.8%. The worst offender was“innovation,” recording a 31% success perception deficit. Another perception gap is the general trend for suppliersbelieving things to be going better than their buyers do. Onaverage, suppliers perceive clients to be benefiting 9% morethan clients themselves believe they are.

Midterm Conclusions

Outsourcing is widely perceived to be delivering business value,but three main issues present themselves:

1) There is a misconception on priorities in performance assessment

Buyers value productivity increases above all other KPIs.However, for suppliers, increased productivity is some waydown the list, with only 23% of suppliers reporting theirawareness that buyers use this as the #1 barometer ofoutsourcing success. Buyers and suppliers should work together towards alignedgovernance procedures that account equally for allstakeholders’ needs. This would go some way to addressingthe aforementioned success perception gaps, currently runningaround -19%.

2) Confidence on assessing performance is not optimised

With only 4% of buyers citing absolute confidence in their abilityto judge a supplier’s efforts, building confidence levels inknowing how well outsourcing partners are performing wouldbe desirable for the industry as a whole: the best governanceschedules take out the gut feel aspect of decision-making andactually measure the relationship. This is what it takes to be inthe 4%, and spreading this best practice is a key priority for theNOA.

3) There seems to be a general miscommunication as tohow well things are going

For buyers, all key value-adding benefits were in successperception deficit, i.e. delivering, but not in line with howdesirable they are. The same was not the case for suppliers,who thought increased levels of productivity, access to newtechnologies/processes/tools and establishing more flexible HRmodels were all delivering above expectation. These three findings - plus the general trend for suppliersbelieving things are going 9% better than the situation clientsdescribe - highlight the need for more transparency inperformance appraisals, perhaps with a rethink of the metricsbeing assessed, in order to build widespread confidence inperformance tracking.

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Part Two: Making Outsourcing WorkCommitting to Better Productivity

Over one in five buyers (22%) have been promised between 11-20% productivity improvements. Around 1 in 3 is expecting aboost of up to 10%; an ambitious 1.5% are expecting a 31-40% hike in productivity. 1 in 3 suppliers believe their clients have been promisedbetween 21-30% better productivity, while only around 1 in 10buyers think that this is the case. When considering cases of no expected improvements at all,1 in 3 buyers have not been promised improvements, while only10% of suppliers report there being no expected commitmentto enhanced productivity. Customers’ views are usually based on what is actuallycontracted for, whereas suppliers’ views represent theircapability deliver. When drawing these intentions into acontract, proposed improvements tend to be toned down dueto the customers’ appetite for internal change, adaptions to newprocesses and tools, and also their willingness to switch fromstaff augmentation to outcome-based models. It should also be mentioned that many contracts focus purelyon cost reduction and prioritise reduced staffing levels overproductivity. These deals can only ever commit to agreed pricerates, because they lack the maturity to measure and improveproductivity.

Committing to Lower Costs

Suppliers appear to be offering more cost reductions thanbuyers believe are on offer. 38% of buyers are expecting up to 10% cost reduction,which was the most popular answer. The second most common return was no commitment at all,which around 34% of buyers are expecting. No buyers areexpecting cost cutting of 30+%, but 17% of suppliers declarethey are offering such reductions. 42% of suppliers claim to be offering 21-30% costreductions. Less than 1 in 10 confess that they have noimmediate plans to reduce their clients’ costs. Suppliers are committing to cost reductions and productivityimprovements simultaneously. Both elements are linked to anextent, e.g. where process efficiency or automation leads tolower headcounts. At the same time, as service providers bear much of theinvestment and risk of internal process improvements thatgenerate productivity benefits, situations where not all ofadvantages can be passed on to the client are not uncommon.

How Is Risk Shared?

Almost exactly an equal number of suppliers and buyersreported heavy usage of risk sharing via delivery metrics suchas SLAs and cost commitments. Timeline commitments are used in less than half of deals (46%). 14% of deals appear not use SLAs - or at least not withparticular rewards or penalties attached. One major disconnect is over the use of targets on certainbusiness outcomes as a risk sharing measure. 63% of suppliers state that business outcomes feature as

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Another small survey conducted during a plenary session atthe NOA Symposium 2014 posed this question to the seatedaudience: Buyers believe that suppliers are not committing toproductivity improvements. Why?11% of attendees thought buyers are not really insisting uponthem.34% said buyer expectations are too high, without evenknowing current levels.25% claimed suppliers need real expertise to deliver, hencethey hesitate to commit.21% believed suppliers are showing willingness to commitbut make it too difficult to implement.8% thought none of the above.


part of the deal (roughly 2 in 3) - but just 1 in 4 buyers claim thatsuch measures are in use. Buyers seem to perceive higher risk attached to the use ofoutcome-based contracts. There is the belief that outcomecontracts demand much more work on their part, and have atendency to require restructuring relatively soon. The majority of customers are currently more comfortablebuying capacity or staff augmentation models because theyeasy to measure and control.

What Commercial Models Are Used?

The most popular way for buyers to design a contract is aroundoutputs. 47% of deals are currently structured this way. But over thenext three years, buying outputs could be usurped: 34% ofbuyers are using outcome-based contracts frequently with 36%planning to use them more. By 2017 the majority of new contracts could be constructedaround business outcomes. Currently, just 4% of suppliers never use outcome-basedcontracts, compared to 11% of buyers.

Many contracts are built around outputs: tickets solved,transactions processed, email boxes monitored etc. i.e. aclearly measurable unit of work, rather than a businessoutcome. But sometimes with output contracts, a customer can sufferpaying heavily for less value, for example, a high number oftickets processed at a lower service quality would cost more,thus rewarding undesirable behaviours. The NOA has long been an advocate of outcome-basedcontracts: the most certain thing in business is change, and ifyour contracts are focused on the ultimate end goal, it’ll meanthey’re much more likely to stay relevant. This way clients avoidhaving to renegotiate on small details that only matter becauseof the way deals were set up in the first place.

What Risk Sharing Mechanisms are Used?

Only 1 in 3 buyers believe that they are sharing risk by applyingfinancial deductions, compared to almost 70% of suppliers. 13% more suppliers believe that the re-awarding of the contractremains at stake (66%) than buy-side professionals suggest(49%). Financial rewards for success are built into less than half ofcontracts, with 39% of buyers and 45% of suppliers reportingthat such incentives are built into their deals. If buyers are applying financial deductions, they should bevery careful in a multisourced scenario. Creating a collaborativementality of cross-vendor teamwork that promotes succeedingor failing together is essential. Risk figures and targets shouldbe matched when vendors are working on the same outcome;this means all parties sign up to lose fees for not meetingtargets, irrespective of who is responsible. The same targets should be interlinked with buy-sideappraisals: if vendors lose part of the fees, performancebonuses of customers’ internal staff should be affected too.

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Ranking the Influencers on Added Value

The variegated factors affecting a deal’s value-addingperformance were ranked, collated and expressed as a %influence factor. The top ranking influencers on added value aresimilar on both sides. “Relationships/Partnership” and “Supplier Transparency/Trust” are in both sides’ top three, with a minor dispute overwhether good governance (buyer view) or aggressivetransformation (supplier view) will add more value. Interestingly, good governance does not make the supplierstop five. It seems suppliers would rather be trusted thangoverned. Buy-side skills are something that buyers and suppliers valueequally, with around 70% of both returning that strong buy-sideoutsourcing skills are a must for making a deal a success. The stats clearly show that, whilst usually considered hottopics, innovation and multisourcing are seen as low prioritycompared to the core facets of relationship building. In fact, the figures seem to show that multisourcing canactually distract from added value - 41% of buyers and 45% ofsuppliers did not return that they thought multisourcing wasimportant from a value-adding perspective. Polaris and the NOA agree that influencers can be groupedinto three levels of criticality: trust and transparency right frominception are vital to building a relationship that can workthrough the inevitable day-to-day issues. To push for ultimate value in the relationship, customers needstrong buy-side capability, deep understanding and robust,intelligent governance. Equally crucial are a clear startingpoint/baseline and suppliers’ people skills: without these,buyers won’t know success when they see it, and if they doglimpse success, won’t actually feel the warm glow ofsatisfaction. Buyers also need processes in place to track on-goingprogress. It’s essential to have a high-definition picture of thesituation from the very start. Once the contract begins,baselines, scope and management all change, graduallyfollowed by timetables. To monitor the value of outsourcing throughout all these

inevitable adaptations, maintain a clear dataset that tracksservice levels, volumes and costs, alongside other key benefitssuch as customer satisfaction.

Investments into the Relationship

Buyers and sellers agree that meeting performance guaranteesand bringing about process improvements are the cornerstonesof a happy relationship. The stand-out figures in this dataset point towards what is notvalued in a relationship. When asked to rate the importance ofinnovation labs, just 14% of buyers valued them (comparedwith 33% of suppliers). Process-on-demand generated an equally underwhelmingresponse - just 14% of buyers state that they make use offlexible services. Robots only feature in the plans of around 23% of allrespondents. The one relationship investment that suppliers perceive to beeven less useful than clients do is ‘client academies’: just 1 in10 suppliers’ believed their clients value them, compared to12% of buy-side professionals. Customers do not currently believe that innovation labs offeradded value. This is a problem for suppliers as it may showbuyers have a low appetite for innovation, or perhaps they donot trust their suppliers’ capability to innovate. As many contracts are structured around staff capacity ratherthan outcomes, it is not hard to see why process-on-demandisn’t widespread, but as more and more contracts move over tooutcome models, expect to see process-on-demand acceleratein popularity.

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Part Three: Outsourcing Aspirations forthe FutureThe Future Intentions of Outsourcers

The majority of buyers plan to increase the scope of theiroutsourcing (59%), while just 7.8% are considering scaling backactivity. Half of buyers are seeking greater business transformationbut suppliers are expecting even more transformation, with 72%of them suggesting clients will ramp up efforts to transform.Attitudes to offshoring may come as a slight surprise: 1 in 4buyers are planning to offshore more, and only 6% are seriouslyconsidering re-shoring. Suppliers, however, think that three-quarters of their clientsare keen to re-shore. Only 29% buyers are currently planning to move to cloud, butsuppliers think that over half (55%) are considering such amove. The feeling that multi-sourcing isn’t an essential driver ofadded value could be represented by the number of buyers, just28%, who are planning to work with more suppliers. But as just 34% are planning to work with less suppliers, thefigures could indicate that most buy-side outsourcing functionsfeel that their current blend of suppliers is working well. There are many more suppliers under the impression thatclients will push for shorter term contracts (36%) than there arebuyers with a mind to do so. Just 14% of clients are planning toinitiate shorter term contracts over the next three years.

ConclusionsThe Future Appears Bright60% of outsourcing buyers plan to use outsourcing more in thenext five years: the outsourcing industry will continue to grow,as existing buyers increase the scope of the work they sendout. It is expected that suppliers would appear moreenthusiastic about the results being delivered than clients;despite this, the survey clearly elucidates how the vast majority

of outsourcing arrangements deliver solid business value, withmost outsourcing buyers satisfied that outsourcing improvedthe competiveness of their business. But expectation is runninghigh, as the majority of suppliers are committing to concurrentproductivity improvements and lower bills for clients.

Outcome-based Contracts Will Catch On, EventuallyOutcome-based contracts will increase in popularity, althoughtraditional output-based contracts with SLAs and costcommitments are still commonplace. There does appear to besome confusion around outcome-based contracts and risksharing: nearly triple the amount of suppliers purport that risk isshared via outcome-based contracts than the amount of buyerswho state that they operate with such models.

Performance Tracking Needs ImprovingThere are also some issues around performance tracking, withmajor dissonance around the importance of key indicators suchas productivity. As improvements are being widely promised,there needs to be redoubled effort at every turn when it comesto tracking these productivity improvements and their residualbenefits.

Relationships and Skills before Innovation While there is slight buyer/supplier dissonance around how tomake relationships work optimally, it appears that a greateremphasis on people and relationship skills would go some wayto aligning perceptions of collaborative success. Relationships are the most valued contributor to positiveperformance: their importance is lauded by buyers andsuppliers equally. Investing in the relationship is vital, but so ismaking the right investments. Popular initiatives like clientacademies and innovation labs are not as well received as theirorganisers would hope; maybe there is a need to reinvent theseactivities, as well as to track them and celebrating any valuethey create. Innovation does not currently appear to be delighting buyers -the success perception deficit of 31% and the distain forinnovation labs point towards this. Buyers and suppliers need towork together to foster innovation at appropriate levels, to avoida slowdown in terms of generating competitive advantage in theclient’s business. Above all else, getting the basics right, such as buildingrelationships and developing quality intelligent governance arelauded as the cornerstones of creating added value in anoutsourcing relationship.

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Carl Adkins of Infinity CCS looks at how outsourced contactcentre operators using on-demand technology platformscan help their clients satisfy omni-channel customers withintoday’s budget constraints.

In June 2007 Apple launched the first iPhone, since whenconsumers have fully embraced digital, any time, any placeconsumption and service. If they want to tweet you from theirphone at 2am, chat with a live agent from their browser beforefinalising a purchase, or use their tablet to video-link withtechnical support from the middle of nowhere, you’d better beable to respond. Unfortunately this new business reality, and the investment itrequires of companies, arrived at the worst possible time. Justsix months after the iPhone launch, in December 2007, theglobal economy was sucker-punched by the start of the GreatRecession. Despite recent signs of recovery most companiesare still under pressure to reduce costs, headcounts and capitalspending.

A Way Out of the Trash CompactorFor occupiers of the C-Suite it must feel like being trapped inthe trash compactor from the first Star Wars movie. On one sidethere is the pressure to be more efficient, and on the other theneed to do more to meet customers’ new demands. Han, Lukeand Leia escaped by passing the job on to R2D2, a droid. Thesame mix of outsourcing and technology can help companiesmeet their challenges today. In this article we will look at how outsourced service providers(OSPs) able to leverage the right technology can have atransformative impact on their clients’ businesses by facilitatingomni-channel communication.

Omni-Channel TechnologyAs the graph below from Dimension Data’s Global Contact CentreBenchmarking Report shows, your competitors are going omni-channel because that’s what your customers are doing. Omni-channel does not mean focussing on every fancy new

channel and device. One of our OSP clients, Alistair Niederer,CEO of Teleperformance UK, says: “This misses the point. Acompany like ours is actually focused on ‘this generationcustomer service’, not just what the media is saying is cool at

present or in the nearfuture.” The challenge is tokeep pace withcustomers’ demandsfor new channels andfunctionality as theyevolve. Which meansit is not enough tojust have in place afuture-prooftechnology platformthat allows you toadd new channels as they become available. You must also beable to integrate customer data, product data, knowledge andIT systems from multiple departmental silos to providecustomers with a seamless experience as they move fromchannel to channel. The agent who speaks to a customer on thephone should know about the tweet, the email and the webchat that led up to the current conversation, otherwise thecustomer experience suffers. The dream of a single agent viewnow has to become a reality.

Increasing Capabilities, Reducing CostsWhether acquiring or servicing customers, meeting their newdemands actually goes hand-in-hand with reducing costs if youhave access to the right technology. Self-service eliminatesunnecessary calls; knowledge bases speed up interactions andimprove their quality; and a single agent view reduces AHT andensures cross-channel consistency. But most contact centresare burdened with technology infrastructures that are not up totoday’s omni-channel requirements. The answer to their problem may lie in outsourcing. SmartOSPs are using technology providers like Infinity CCS to accessstate-of-the-art technology with pay-as-you-go, massivelyscalable cloud and hybrid delivery models that help furtherreduce costs, eliminate capex spending and facilitate rapid

26

Carl Adkins CEO

As your customers askfor more, here’s how todeliver It with less

Channels used in the contact centre

82% of companies see the contact centre as a competitivedifferentiator. But over 80% believe their current IT systemswill not meet future needs. (Dimension Data 2013/14 GlobalContact Centre Benchmarking Report)

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testing and roll-out. Those OSPs can then pass on thesebenefits to their clients.

The Transformation of OutsourcingWith access to the necessary technology, OSPs can now notonly manage but transform the functions they manage. Insteadof being given systems and a job and relying on economies ofscale to deliver savings, OSPs are now able to addresscompetitive business goals – service or acquire customers,increase NPS or advocacy scores. Our client David Turner, CEO of Webhelp UK, a leading OSPin the customer experience management sector, says: “WhileOSPs have typically been reluctant to invest in technologyahead of client demand, many are now realising that their futureprosperity depends on their ability to manage multiple channelsand are investing in technology to support it.” They are doingso, he says, to enable their clients to achieve “a step change incustomer management capability, as well as a real andsustainable reduction in cost.” In recent years OSPs have built robust technologyinfrastructures capable of coping with the ever-more stringentcompliance and data security requirements placed upon them.

While no doubt a good thing, this can conflict with the need tobe responsive and nimble. Partnering with a technology company like Infinity CCS – asOSPs such as Teleperformance, Webhelp, HGS and Interact do– brings them this flexibility. With our single agent view and on-demand contact centre solutions, OSPs are able to satisfy theirclients’ demands for transformative services quickly, efficientlyand without overloading their internal IT teams.

Ask for More, for LessThe new business reality ushered in by customers’ adoption ofmultiple digital channels and the Great Recession’s lingeringimpact on budgets is not going away. The good news isenlightened OSPs that have adopted on-demand technologyinfrastructures can help any company meet these twoseemingly contradictory challenges head-on.

For more information contact Infinity CCS on +44 (0)121 450 7830, email [email protected] or visitwww.infinityccs.comWith thanks to Dimension Data, Teleperformance UK,Webhelp UK

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The outsourcing industry grewthroughout 2014 and all indicators arethere will be more growth in 2015, butwhat will this future growth look like andwhat lies ahead for the outsourcingindustry? Outsourcing Yearbook soughtthe views of the outsourcing analystcommunity…


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predictionsNOA Year book 2015 aw.qxp_ark 10/04/2015 10:04 Page 29

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Can you predict the future? No, neither can I! But what I can dois analyse the thousands of conversations I have in a year aboutoutsourcing and make informed guesses, based on people’squestions and concerns, on which of those conversations willmorph into trends over the next 12 months. If you look into thepresent hard enough, it turns into the future…

The As-a-Service EconomyThe "As-a-Service Economy" is set to disrupt the traditionaloutsourcing industry we know and love in a major way,impacting on how service buyers receive services and howservice providers sell and deliver them.Organisations are reviewing how they can maximise value in thisnew era, be that through infrastructure-as-a-service, platform-as-a-service or software-as-a-service. The NOA is supportingHfS Research in a study in this area. We'll tell you how ready UKcompanies are to embrace this new dawn, compared to theirEuropean and American counterparts, at our Symposium on 24 June in London.

Outsourcing politicised 2015 being an election year, expect outsourcing to pop up onthe campaign trail, as well as in live TV debates - and getroundly criticised by MPs who know very little about how itworks. Expect them to snipe about the supposed ‘creepingprivatisation’ of the NHS and condemnation of PFI initiatives,while simultaneously offering no concrete plans on how toimprove infrastructure and services without private sector help.And don’t expect any party to speak up in favour of outsourcing- even though privately they might be in favour, when running inthe quinquennial national popularity contest, showing amodicum of support for outsourcing might cost them a few vitalvotes from the red-top reading White Van man.

Skills crunch to turn a cornerIf you believe all you read, every industry is in a skills crisis. The outsourcing industry does need more skilled people on thetechnology side and also the interpersonal, relationshipgovernance side. The BBC’s Make It Digital initiative, to boostcoding and digital creativity skills among young people, is avery welcome move and most of the political parties are callingfor businesses to create more apprenticeships… I predict a rushof new apprenticeships in late 2015, once the government is

decided and tax breaks for making apprentice jobs areannounced.

On the interpersonal skills side, there needs to be training foryoung people on how to be client-facing, collaborative and havea good customer service ethic - they could do a lot worse thantake on the NOA’s GCSE-level qualification. I also believe it’shigh time negotiation was taught in schools - negotiation is abig part of life and kids should leave school with a goodunderstanding of the process. I’d like to see that form part ofany upcoming reviews of the national curriculum.

Cloud gets more expensive as it grows up2015 is touted as the year businesses stop fighting the cloud,but the cloud will have its own battles to overcome if this is tobe its watershed year: towards the end of 2015, the world willbe right on the brink of producing more data than it can store. In 2013, we generated around 600bn DVDs’ worth - by 2020,it’s expected to be 7500bn, a whopping 44 zettabytes (source:BBC news). This means the cloud has got to grow, thereforewe’ll need massive investments in data centres and new, cuttingedge technology that means a greater density of data can bestored in a smaller space. Of course, there will be a fresh roundof security concerns, with firewalls beefed up accordingly. Willall this make cloud solutions more expensive? Probably! Get aprice-fix built in before 2015 ends, folks.

Customer experience management will becomeincreasingly importantWe’re living in an age of peer reviews and social media, whereconsumers call the shots. As more and more consumers getconfident with this power, we are going to see a situation whereheightening the customer experience across all touch-points isat the forefront of every outsourcing buyers’ mind. If suppliersdon’t make the effort to noticeably improve the customers’experience, questions will be asked around the value of theirwork. I’m expecting many more companies to increase theircustomer-centricity across various platforms, and I’m predictingthat many more companies will engage specialist social mediacustomer service agencies to up-skill in this area.

Robots might not mean bargainsSome say that robotics is to 2015 what offshore BPO was 10years ago: that it will change the game forever… signifying a

Kerry Hallard CEO, NOA

Predictions


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death knell to long-distance, low-cost offshoring. Yet offshoringto India et al could become the PR-friendly moralist’s choice:we might see a perception shift to ‘at least jobs are beingcreated somewhere’. Robotics certainly has an allure for anyonewishing to save money on their BPO. But who will save themoney, really? I think there will be some interestingconversations going on where BPO contracts are already live.Will suppliers proactively switch from FTE models and pass thesavings on to their clients? Or will they simply reap the benefitsof their innovation themselves? I expect that will depend on thelength and quality of the individual relationship… and the calibreand expertise of the buy-side team.

Impact sourcing to make a big impactWe know all about outsourcing to do well - now you canoutsource to do good. I predict a rise of impact sourcing in2015 with partnerships set up in underdeveloped geo-locations,with one eye on the bottom line and one on the bigger picture.It’s not strictly CSR, which can be any type of philanthropicactivity - this is giving back by redirecting jobs where they areneeded most which, synergistically, happens to be cheap labourpools. An emphatic win/win and the counterbalance to the riseof the robots. I’m not sure this will take off at quite the samepace as robotics, but it is an option that is well and truly on themap in 2015 and that can only be a good thing.

The internet of everythingConnectivity ubiquity is coming on strong in 2015. Using asmartphone to turn your central heating on during yourcommute homewards will be just the start of it. Soon enough,there will be fully smart homes, smart offices, smart cars: howabout a coffee percolator that orders its own refills, delivered bya Google Car within the hour?

With a whole new range of connected devices being built, by2017, the internet of things is predicted to be bigger than thePC, tablet and smartphone markets combined, hence whyventure capital is flooding in for developers of IoT devices. I’llbet both cyber criminals and anti-malware companies arerubbing their hands with glee; imagine your central heatingcatching a virus and holding you to ransom before you can getyour radiators going. Taking the right steps to secure the newdigital ‘wild west’ will be absolutely paramount to it taking off.

Open book accounting will be all the rageWhat started a few years ago as an exercise in public sectorfreedom of information is moving headlong into the privatesector: if the public sector can insist on knowing profit marginsetc., why can’t the private? More and more deals are beingnegotiated with such clauses, even when contracts are alreadyunderway. In 2015, anyone not making use of such contractualobligations, in my opinion, isn’t governing their outsourcing

contracts in an optimised fashion. Many, many books will befalling open all through this year.

Contracting for outcomes will become keyCould 2015 be the year the world gets wise to KPIs? Buyers stilllove them, but intelligent governance reporting only has them asa small snippet of information. They’re not much use - theyoften create dysfunctional behaviour because, once you make ameasure a target, it’s no longer fit for purpose as a measure.Contracting for outcomes is the way to avoid suppliers strivingto meet a target that doesn’t really mean anything - and thatway you only pay for what you really wanted in the first place.

Innovation will remain mysterious Innovation has always been tricky to pin down. All theframeworks in the world won’t make a company automaticallyinnovative; you can’t just turn it on like a light switch. Leaderswill continue to covet it, suppliers will promise it, buyers will besuspicious of paying upfront for it. Will we be any closer to amagic formula to guarantee innovation in 2015? Possibly not,but big innovations will happen, in companies with a culturesufficiently open-minded to allow it. A lot of the time, they’re thesmaller players, and when they have an eye-catching innovativesuccess, they get acquired by the behemoths and bring a bit ofthat culture with them. So I predict lots of innovation, lots ofacquisition and maybe a few new models such as innovation-as-a-service or, more aptly, the results of innovation-as-service.That’s what buyers want, so suppliers will have to work out away to sell it to them.

Standards to raise the bar 2015 will be a year for suppliers and buyers to assess theiroutsourcing maturity levels against global benchmarks, with thebest getting accredited for their excellence.

Thanks to the hard work of our very own Adrian Quayle(amongst others), late 2014 saw the rubberstamping of ISO37500, a global standard in outsourcing. With the outsourcingmarket predicted to keep on growing, the more people whounderstand the language and norms of a healthy collaborativeculture, the better chance there is that people will feelcomfortable they’re doing the right things at the right times andoperating in the spirit of partnership. If you’re wondering howmature and optimised your contracts are, taking the 15 minuteonline NOA outsourcing lifecycle assessment is the best placeto start - and the first step to getting your company accredited. With growing concerns of who should be responsible formeeting the costs of regulation, I predict adhering to standardsand proving it through accreditation will race up the corporateagenda in 2015.

Predictions


AWARDS 2015

NATIONAL OUTSOURCING ASSOCIATION

FOR BEST PRACTICE IN OUTSOURCING

Now in its twelfth year, and firmly established as the awards all outsourcers want to win,the NOA Awards are now open for entries.

With a planned attendance of 500 guests, the glittering evening will provide an ideal setting to entertain and network with leading players from

the industry.

The winners represent the length and breadth of the outsourcing industry, from bankingto telecoms, small companies to large corporates.

There are 18 categories up for grabs and the deadline for entries is Friday 5th June 2015.

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T H E L A N D M A R K H O T E L , L O N D O N T H U R S D A Y 1 9 T H N O V E M B E R 2 0 1 5

Entries Open


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1. The first wave of arbitrage was to move offshore to seek outtalented labor with lower wages than onshore. The breakdownof national barriers to access new labor markets still representsthe biggest game changer for the services industry in decadesand has been revolutionary to many countries. We have seen,and in 2014 are still seeing, big changes in the countriesparticipating in this global exchange of services. Countriesvalue propositions are evolving and new countries are joiningthe competition to attract companies to locate serviceproduction on their shores. Recently, A.T. Kearney released theGlobal Services Location Index (GSLI), which offers a snapshotof the global labor market for services for business leaders whomust choose among a growing number of locations. The GSLIanalyzes and ranks the top 51 countries worldwide as the bestdestinations for providing outsourcing activities, including ITservices and support, contact centers and back-office support.

2. The second wave came as companies reconsidered theirstrategies to organize their production of back office services.After spending considerable time and effort to build up theirown centers in offshore locations, it has since becomemainstream to locate services with outsource providers, suchas IBM, CapGemini, and TCS. In 2014 we have seen companiesreassessing their outsource strategies from a broad basedmove outsource to a selective move to insource specificfunctions to retain know-how and adapt to a changing role of IT functions.

3. The biggest outsourcing development in 2014 is, in oneword: No-shoring. This constitutes the third wave, still in itsinfancy: automation. While labor in many countries is still manytimes cheaper than equivalent talent in advanced economies,robots can be programmed to perform many routine tasks at

Q1) Can you summarise the key trends for 2014. What’s changed? What are you seeing more/less of?

As we consider the world of back office services, we can see three waves of arbitrage. Though they have appeared in sequence,today, they are all present in concert. And they have all evolved in different ways during 2014.

Predictions

Johan Goff Senior ManagerATKearney

The three waves of back office arbitrage

Wave

Emergence

Evolution

1 Offshore

~ 2000

• Location of IT/BPO resources in low cost countries was, and is, the main way of finding arbitrage• Still, the globalisation of services has just begun• The range of countries and their respective roles in global value chains are in constant evolution

2 Outsource

Mid 2000s

• Third parties operate back office operations, on or off-shore, much more effectively• Most companies spun off non-core operations to vendors in mid 2000s• Companies selectively bring key roles back in-house to retain knowledge and adapt to shifting core businesses

3 Automate

Mid 2010s

• Currently, automation is in the form of ERP solutions that automate repetitive high volume jobs• Large investments have been needed to implement • Quick and easy deployment make a automation feasible for whole new categories of jobs


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even lower costs. As the technology allows companies toreplace workers with robots, we can expect dramatic changesto how we look at both offshoring and outsourcing in the future.This has potentially revolutionary consequences for industryrationalization and labor markets. It also has the effect that thelocation where a task is performed becomes meaningless. Thetechnology is already available and as so often, the mainobstacle to rapid implementation is human: organizationalobstacles and slow adaptation of new technologies. Thequestion is not if, but how fast, companies will adopt this newtechnology and if traditional outsourcing providers will be quickenough to adapt before their business models have becomeobsolete.

Q2) What company has impressed you the most in 2014?E.g. this could be a buyer through their use of outsourcing,or a new innovation deployed by a service provider

As so often, it is not the main players in the industry, i.e. thebuyers or the sellers of outsource services, that are causingdisruptive change, it is technology players adjacent to theindustry that are rewriting the map of services. Thus, the mostinteresting conversations I have had this year has been withBritish technology company Blue Prism, who has developed thetechnology for automation of small scale service functions,enabling the industry to deploy automation on a broad scale,one function at a time and in whole new areas.

Q3) Looking ahead, what do you think will be the numberone issue for:

• …buyers, automation offers the next wave of cost savings at a time when offshoring and outsourcing have exhausted their arbitrage potential. As costs on the back office side can be further reduced, more focus can be directed towards the company’s core business. At the same time, scarce IT resources can be freed up to focus on more strategic issues than helping business units with low scale automation tasks. The main challenge for companies is to evolve their

organizations to be able to adopt already existing technology.

• …outsourcing providers automation can be a blessing to continue to stay competitive when most other sources of cost savings are exhausted. At the same time, this new paradigm presents a risk for companies that do not adapt fast enough. We have seen again and again how companies that have found competitive advantage in a niche are unwilling to change when that is challenged by new technologies and sliding into irrelevance. Adaption among companies so far is uneven and slow movers may suffer. At this point, uptake is will smaller companies that are quick and nimble and what to focus on new ways of competitive advantage.

• …countries in the low value add niche; an industry development strategy that relied on starting with data entry and similar routine tasks is increasingly in danger. Some countries, like India, has effectively moved up the value chain to perform more advanced tasks but thousands of people in the country’s offshore hubs are still working with routine tasks. Other countries that are new to the industry may still be stuck doing less efficient tasks. Countries need to have a strategy to aggressively move up the value chain if they want to stay relevant in the industry. At the same time, a new opportunity is opening up, while the robots are physically located in anonymous server halls located anywhere, there is still a need for qualified staff that can program and direct these robots. These jobs will be far fewer than the ones they replace but will be higher value added and require more skills. Countries that already have an advanced IT/BPO industry are in pole position to capture this opportunity.

... the main obstacle to rapid implementation ishuman: organisational obstacles and slowadaptation of new technologies.

Predictions


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Q1) Can you summarise in bullet points, the key trends for2014. What’s changed? What are you seeing more/less of?

From a Gartner perspective we are seeing across the globe anincreased interest in the use and deployment of Cloudcomputing plus awareness of the role “digitalisation” has in themarket. Some organisations have already successfullyimplement Cloud computing capability both from aninfrastructure perspective as well as using SaaS capabilitiessuch as Salesforce.com

As we enter 2015, economists expect a mixed year, with manyadvanced economies finally recovering from protracteddownturns, and growth slowing in some developing countries.Against the backdrop of this gradual macroeconomic shift,there is a much bigger tectonic shift happening. All industriesand all geographies are being radically reshaped by digitalopportunities and threats. Arguably, the traditional, physical-asset-heavy and primary industries are even more affected thanhigh-tech companies. Examples include agriculture companiesthat can help predict and optimize yields in near real time;sports companies that blur the boundaries with healthcareorganizations; logistics companies that can price financial risk inreal time better than banks can; and governments that can gobeyond asking what citizens want, observing and responding totheir needs in real time.

Current enterprise IT is not set up to easily deliver on thesedigital dreams. In the Gartner global CIO survey, we testedrespondents' agreement with a very strong statement: "Mybusiness and IT organization are being engulfed by a torrent ofdigital opportunities. We cannot respond in a timely fashion.This threatens the success of the business and the credibility ofthe IT organization." Fifty-one percent — the majority of CIOs —

agreed. This is why Gartner has chosen the meme of the "digitaldragon" — potentially very powerful, but also potentiallydestructive if not tamed.

Beyond not being ready now, 42% of CIOs believe that their ITorganizations do not have the right skills and capabilities inplace to get ready for the future.

Q2) In your opinion, what has been the biggest outsourcingdevelopment in 2014?

In the global sourcing market we now see less and less singlesupplier “mega” deals and more of a move towardsmultisourcing through the selection of a few “best of breed”suppliers who can work together in a “vendor eco system” anddeliver the end to end services required to support thebusiness. Agility, the ability to quickly respond to marketconditions, is a key theme for many organisations.

Many enterprises still struggle with the fundamentals ofsourcing; even those that use the layered approach of theGartner Adaptive Sourcing framework which helps leadersestablish a rational approach to applying different governancerules to enterprise IT services.

Similar but not identical to Gartner's Pace-Layered ApplicationStrategy, the Adaptive Sourcing Model's three layers distinguishIT services, depending on their rate and speed of change andthe degree and locus of required oversight. For example, at the

Ian PuddyVice PresidentGartner

All industries and all geographies are beingradically reshaped by digital opportunities andthreats.

Predictions


lowest layer — run — core transaction processing and masterdata are often impacted, so services in this layer are subject tofar more oversight than more "disposable" services in theinnovate layer. The layers are defined as follows:

• Innovate. These services are sourced on an ad hoc basis to address emerging business requirements or opportunities. They typically entail a short life cycle and use departmental, external and consumer-grade technologies. Since learning and/or short-term gains are the goal, innovate services tend to suffer high failure rates due to their experimental nature.

• Differentiate. These services enable ongoing improvement of unique company processes and industry-specific capabilities.They have a medium life cycle (one to three years) and need frequent reconfiguring to accommodate changing business practices and customer requirements. Continuous process improvement and reconfiguration are the major goals here.

• Run. These established services support the end-to-end delivery of IT services, such as core transaction processing and critical master data management for corporate processesand the entire business. Typically, they constitute 50% to 70% of the IT budget, and being critical for business viability, they are subject to the highest control in terms of security, compliance, financial and technical compatibility, management and automation features, and general oversight.Process efficiency is the primary focus here. Because run includes the operation and support of systems of record, innovation and differentiation (once the latter two enter production), the compliance requirements are very specific.

Q3) Looking ahead, what do you think will be the numberone issue for: Buyers, Suppliers and Support services (lawfirms, advisors etc)

Digital business is accelerating new technology adoption anddriving CIOs to innovate and to be more customer centric andrethink their IT services value chain. A pace-layered sourcingstrategy will help sourcing executives to innovate, differentiateand run their IT operations better.

Key Challenges include• Success with new digital models and the adoption of the

Nexus of Forces-related technology (mobile, social, information and cloud) necessitates a significant redesign of the corporate IT services value chain.

• Abundant new technology options exist, but proven business models are relatively scarce and most organizations are not prepared to innovate quickly for digital business transformation.

• Customer-oriented business innovation will spur unprecedented, fast transformation of business processes to meet new customer expectations, ramp up on scale and deliver competitively superior business performance.

• Online client interactions require top-quality services to drive volume growth, while security and reliability are threatened bythe accelerated rate of change, driven by the accrued rate of innovation.

• Buyers The ability to selectively chose the right providers who can work together to deliver the IT services and capability that theenterprise needs from a business perspective, particularly within the digital area

• Suppliers The ability to work together with other suppliers in a seamless way as one vendor eco system and deliver the ongoing IT services and capabilities required by the clients business.

• Support services (law firms, advisors etc) To understand and recognise the different buyers of IT services within an enterprise and how to deliver the best advice across the different and often new stakeholders

Digital business is accelerating new technologyadoption and driving CIOs to innovate and tobe more customer centric and rethink their ITservices value chain.

Predictions

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• Robotic process automation is rapidly taking over as a key wrap-around for BPO. Initially, the main usage of robotics is for getting data from one or more applications to another, making intelligent deductions & matching in support of data enrichment, and filling in missing fields. A bit like macros on steroids. Loosely coupled with existing systems rather than changing them. The advantage of RPA is that it seems to be achieving a 30% plus cost take-out where employed and very quickly. So a big one-off boost for many organizations

• Analytics is becoming all-pervasive and increasingly predictive. Analytics has been around in support of process improvement initiatives & Lean Six sigma projects for many years. It has also been present in areas like fraud analytics. However, analytics is now becoming much more pervasive, much more embedded in processes, and much more predictive & forward-looking in terms of recommending immediate business actions

• Digital is becoming critical both in the front-office in support of channel shift and improved customer journeys, a single view of the customer & linked multi-channel delivery, and in the back-office in support of supplier management & liaison.

Like analytics, Digital is pervading many organizational processes across the board

• The Internet of Things. An emerging development rather than a fully-fledged one but one that has the potential to open up a whole new world of sensor-enabled industry-specific BPO in areas ranging from healthcare to predictive maintenance. This takes outsourcing beyond administrative tasks and out into the real world

• BPO vendors increasingly developing their own platforms. This approach potentially enables them to retain the IP in- house, an important factor in areas like robotics and AI, reduce their cost to serve by eliminating the cost of thirdparty licences, and achieve a much more tightly integrated and coherent combination of pre-built processes, dashboards and analytics supported by underlying best practice process models

• Use of cloud-based portals, emerging strongly particularly in HR in areas like personnel administration.


The recognition not only that outsourcing needs to deliverinnovation but that it needs to do so at pace. In the past bothbuyers and vendors have sometimes been reluctant to adoptchange and have lacked confidence in the outcomes of change.However, BPO has now grown up in many areas, though not all,and we are seeing the emergence of “High Velocity BPO” wheresignificant transformation increasingly takes place at the front-

Clearly the continuing adoption of GlobalBusiness Services is a factor in enhancingsynergies across processes and maintainingthe investment to drive change...

John WillmottCEONelsonHall

Predictions

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end of contracts rather than the back-end, and where there ismuch greater focus on looking at the end-to-end KPIs, and keybusiness, rather than process, outcomes and driving towardsthese fast. Clearly the continuing adoption of Global BusinessServices is a factor in enhancing synergies across processesand maintaining the investment to drive change, andorganizations are increasingly looking forward to new businessmodels rather than just trying to achieve greater efficiencywithin the status quo. This change in focus to identifying andpursuing a future business vision is a really major change incorporate thinking with organizations now very much focusingon building for the future and not just reducing cost. The arrivalof digital, in particular, means that the majority of currentbusiness models are broken and organizations need to look tonew ways of doing business.


There are numerous examples where progress has been madein the past year. In particular, I’m impressed by the way in whichthe customer management services vendors have movedbeyond excellence in people management and begun toembrace consulting and analytics in support of improveddigital-enhanced customer journeys, together with theirincreasing confidence in using technology to achieve a singleview of the customer and begin to become more confident inpredicting next best actions both through agents and online. Inthe middle-office, utilities are beginning to emerge in a numberof areas particularly within the capital markets sector. While inthe back-office, HR outsourcing is undergoing a new lease oflife and becoming better able to support employees andmanagers across the organization with services based onplatforms such as Workday and successfactors, while therecruiters in RPO and MSP are increasingly adopting all formsof social media to identify and entice a high calibre of

candidate. And in areas like finance & accounting BPO, theprocess models are now very mature and RPA is having a majorimpact on productivity.

Q4) Looking ahead, what do you think will be the numberone issue for:

a) Buyers• Possibly how fast to move to cloud and adopt other forms of automation. There have been considerable developments in addressing the major inhibitor of cloud, namely security, during 2014, nonetheless security remains a major concern restricting the pace and extent to which organizations rollout hybrid cloud and increase the role of public cloud adoptions. Similarly, organizations are concerned about the level of vendor lock-in that potentially results from the adoption of high-levels of often proprietary automation.

b) Suppliers• Suppliers in the past year have all been caught up in the perceived need to increase the levels of automation in their existing contracts before a competitor offers to do so and displaces them. This creates several challenges. Firstly the commercial challenge of not wanting to be caught with an FTE-based contract and secondly the need to move their services up the value chain and achieve client adoption ahead of the advancing wave of automation. These challenges will continue apace for at least another year before they plateau out, probably coming to a head in 2015

c) Support services (law firms, advisors etc) • For law firms, the issue probably remains one of how to contract for innovation. It is relatively easy and established practice to contract for steady state processes. However, it is much harder to contract for dynamic environments where the values of outcomes are much harder to predict

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...organizations are concerned about the levelof vendor lock-in that potentially results fromthe adoption of high-levels of often proprietaryautomation.

Predictions



• Greater acceptance and understanding of global outsourcing- Chasing domain expertise and discrete skills, rather than chasing lower cost- The world is getting smaller due to technology: VoIP, video conferencing, collaboration tools all make global outsourcing so much easier.

• A greater knowledge of the issues involved- Technical – issues such as latency, priority and quality of service, security, mobility needs- Business – issues such as investing in outsourcing, rather than going in on the expectation of saving money- Geo-political – issues such as shifting sands at the political level and the need for “Plan B” to always be in place, for example to switch to an alternative provider in case of regime change or natural disaster.

• Greater use of multi-outsourcing, but with single contract with one throat to choke- Again, based on gaining access to the best skills available, using a master contract through a headline outsourcer, with them owning all the subcontracts and having to sort out any issues.

• Smaller, point projects with better defined KPIs based on desired outcomes – a move away from e.g. contact centre agents being measured on number of calls dealt with to the happiness of the caller after the call (as with Birmingham city centre, who actually pulled an outsourced contact centre back in as a KPI based on number of calls dealt with meant that the company responsible was actively dealing badly with

calls to get people to call back again), or on reduction on number of issues for areas such as dealing with forms-based data and so on.

• In fact, fewer project-base agreements. There is more of a movement towards the use of rolling agreements without a specific end result in mind, where as long as the agreement continues to work for both sides, a “subscription” will be paid by the customer. A far better approach than a 12, 18 or 36 month “fixed” project that then fails.

• Fewer failures – the market is maturing; business models are being ironed out and stabilised. Outsourcing is moving away from the Wild West Frontier area to being far more of a proven model that enables organisations to do things that they couldn’t have done previously within cost constraints.


• The evolution of the underlying technology to make it that an offshore outsourcer can operate just as effectively as an onshore one. Global networks are now highly available and pretty effective; modern applications and communication/collaboration systems are built to make the most of these. Therefore, an outsourcer in Japan can operate as effectively as one in Jarrow – as long as all the human aspects of culture, language and working across time zones are all dealt with by the outsourcing company.

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Clive LongbottomService DirectorQuoCirca

Outsourcing is moving away from the WildWest Frontier area to being far more of aproven model...

Predictions


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• Increased use of technology in integrating the outsource company’s activities with the customer. For example, by using cloud-based systems, the customer can integrate what the outsourcing company is doing directly into its processes, rather than waiting for outputs from the outsource company that then have to be integrated separately or manually imported.

• Building of greater trust relationships between the outsource company and the customer – it is a two-way thing, and Quocirca is seeing that more companies are realising that seeing the outsource company as a supplier is not helpful and for the outsource company to see the customer as just a client is also sub-optimal. Making both parties work as if part of the same company means that both sides have skin in the game: SLAs are increasingly being based on closely watching trends and sitting down and talking about them, rather than waving a stick when previously agreed levels have been missed.


This is a difficult one. 2014 has been a massively dynamic year for outsourcing: on the tails of 2013, we have seen Indianoutsourcing companies continue to move far more towards aglobal comparative system, rather than a labour arbitrage one.We have seen the resurgence of Generation 1 offshoringoutsourcing areas, such as the Philippines and Ireland. UK-based outsourcing companies have had to re-invent themselvesto deal with labour arbitrage, constrained capital markets andfaster moving customer requirements. More technologyvendors have moved into the outsourcing market through theuse of cloud technologies and either internal professionalservice teams or partnerships with new or existing outsourcingcompanies. All told, 2014 has been a time of major change formany players in the outsourcing markets: I would have to

decline to pick any one player and just state that 2015 will show which players have made the right moves and can buildupon them, and those who have made the wrong bets and willregret them.

Q4) Looking ahead, what do you think will be the numberone issue for:a) Buyers –

Avoiding lock in to unsuitable contracts through outsourcing companies who have yet to fully understand the new world

b) Suppliers –

Getting far enough ahead of the curve so that they do not findthemselves having to carry out major changes to respondadequately to the markets, and yet can carry their existingcustomer base with them as required. This may require re-negotiating many existing contracts to bring existing customersinto the new world: however, as in many cases, this will be tothe customer’s advantage, it should not be a major issue (betterservice provision, more trusted relationship, more skin in thegame, etc)

c) Support services (law firms, advisors etc) –

Moving with the times. Open-ended agreements withsubscription costs, rather than fixed projects with “fixed” priceswill need new contracts and new ways of extricating either partyfrom any agreement. Measuring effectiveness and value willneed a new type of advisor/consultant who can cover the softerside of what any outsourcing agreement has managed toprovide – for example, was such and such a change down tohow the outsourcing company did something, or down to howthe business changed its processes?

...more companies are realising that seeing theoutsource company as a supplier is not helpfuland for the outsource company to see thecustomer as just a client is also sub-optimal.

Predictions


Knowing how outsourcing works inpractice is an important lesson to passon to others. Outsourcing Yearbookdelves deep into two Great Britishinstitutions to learn more…

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CaseStudies


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Is Shared Services the remedy to the NHS budgetarywoes? At a time when the NHS is straining to improve service levelswhilst facing draconian budgetary pressures sharing servicessounds, on paper, the sensible route to ensuring more funds areavailable for frontline care. Ramping up outsourcing is an option,but in the context of that most emotionally-charged ofgovernment agencies, the NHS, remains a heavily-politicalisedhot potato. But shared services does not suffer the same readyassociations with privatisation, therefore, is much less politicallysensitive - yet take-up levels are still a trickle, not quite a trend.

The Challenge of NHS Shared Services: Compelling,yet Complicated Mark Crichard of RPC explained: “The economic argument forsharing services is a strong one, but joint venture arrangementsare enormously complex to set up, much more complex thanoutsourcing, and this presents one of the biggest challenges inmaking them work. But they remain attractive, for a number ofreasons: firstly, you do get a lot of control. As a customer, you geta management stake in the supplier. It’s a great way to ensurecontinuity - over time, strategies and ambitions of strategicpartners can become unaligned. In a genuine joint venture that isNHS-branded, there is a long-term shared mission with a sense ofpermanence to it. Plus, if the deal is structured right, NHSFoundation Trusts can go beyond cost-saving and generate revenue.”

David Morris is the CEO of the biggest NHS-branded jointventure of them all, NHS Shared Business Services, a back-officefinancial services platform that has saved the Department ofHealth £224million over the last 9 years, acing its 10 year targetwith a whole year to spare: “Drawing on the experience ofimplementing ISFE, a significant percentage of challenges facedare centred around change – introducing users to new systemsand being sensitive to the fact that people are going throughmajor changes in their working lives. Not only was NHS England anew organisation but so too were the 200+ clinical commissioninggroups. The project centred on the replacement of a disparaterange of legacy accounting systems with a single standardisedshared service accounting platform. This involved a sizeablecultural change facing more than 6000 users, many of whom hadno experience of shared services and who were all new to thesystem.”

Case Studies

Shared Servicesin the NHSWinning hearts and minds -and keeping them won.Glen Hickling

Outsourcing Yearbook 2015 spoke to DavidMorris, CEO of NHS Shared Business Services,the biggest NHS joint venture so far, a 50/50partnership between the Department of Health andSteria that has created a ‘integrated single financialenvironment’ (ISFE) that is used by 40% of NHSproviders and 100% of commissioning groups, andMark Crichard of RPC, a senior lawyer with vastexperience of advising hospital trusts on jointventures in both back office and front-lineoperations, working with the Royal Free, Guys andSt Thomas’, UCLH, Kings College, MiddlesexUniversity Hospital and Liverpool Women’s Hospital.


Charm Offensive: Winning Hearts and Minds in Practice.David Morris, NHS SBS: “The ISFE programme’s success flowedfrom joint senior governance and holistic decision-making. Issueswere addressed using a flexible approach relying on informedinteraction rather than formal committees. Over 200 peopleworked together from NHS SBS, NHS England and thecommissioning organisations, to design the processes,governance and training programmes, working together as asingle team with few day-to-day hierarchical distinctions.” Mark Crichard, RPC: “With so many people involved, you have tobe careful not to let things get too drawn out. If the stakeholdermeetings go on for too long, you risk losing peoples’ trust. Whensenior managers are defining strategy and conductingstakeholder engagement exercises, you need decent alignmentbetween the NHS partner organisations, so they can present asingle face to the private sector supplier. If the arrangementincludes or impacts clinical processes, you have to get the seniorconsultants onside. That’s absolutely essential.”

Designing Joint Governance for Mutual SatisfactionThe challenge of shared services’ complexity is never moreevident than in designing joint governance, as it is the robustnessand quality of this aspect of the deal that will drive long termvalue, sustained success and positive perceptions.

David Morris: “Each party should have a programme directorand they should work in tandem as equals, keeping the focus onaccurate reporting on deliverables, with checkpoints at initiationand mid-stage deliverables and comprehensive exceptionreporting and management. Importantly, this approach should becontinued into normal service delivery, with reports and measurescovering service parameters and KPIs - we have 150+ reports andmeasures - as well as internal measures to support LEANprogrammes.”

Mark Crichard: “There are two ways to look at governance inthe context of shared service operations: from a ‘customer’ side -SLAs KPIs etc. - and from an ‘investor’ side. On the customerside, make the governance as robust as you would with atraditional "arms length" outsourcing, so if you fall out with yourinvestment partner you still have the right tools and processes tokeep the service working. There should be lines of communicationfor dealing with day-to-day issues & appropriate escalationgroups, with clear rules on how and when to use them. It’s alsoworth noting that, organisations not motivated by profit typicallyhave no interest in sanctions like small amounts of service credit.It’s much better to re-engineer the consequences of servicefailure. For example, put in place remedial plans that focus on thefix and bringing the quality back, then if they fail at that stage,providers should hit by much more material financial sanctions.”

“From an investor perspective, you structure the governanceaccording to how much control you want. Typically there are twokey levels of decision; the "big stuff", for example, if you want tochange strategic direction, these are decisions you want

unanimity on, and each partner has the right to insist on acomplete veto. So as not to strangle the business, smallerdecisions can be made by majority or delegating to the executiveto have the final say. It is important to get the balance, betweencontrol and flexibility, right.”

The Challenges of InteroperabilityFor a shared service to be of huge benefit to the UK taxpayer, itmust be able to be rolled out a succession of NHS organisations -this is the Holy Grail of saving public money. Mark Crichard: “Perhaps surprisingly, in a number areas there is alack of standardisation across NHS organisations. That lack ofstandardisation can hamper the ability to deploy across more thanone NHS organisation. So, for instance in context of pathologythere are always subtle but potentially major differences tosurmount lots of hospitals do tests for GPs. Some give test tubesetc. for free, some charge. Some have paper-based record andreporting systems, some have electronic. Similarly, what anindividual hospital defines as a certain test, e.g. the constituentparts, the sub-tests within a test, varies from one hospital toanother and can have massive implications on costs if thedifferences are not understood.”

David Morris: “It’s essential to fully scope the project, have aclear understanding of the objectives, the vision, who the userswill be, how they will use the system and the potential barriersthat will present themselves at every level. An enduringengagement strategy as the service is developed and processesare defined and refined ensures that issues and challenges areaddressed collaboratively and comprehensively.”

Mark Crichard: It’s vital, for a shared service to get themaximum benefit, that NHS leaders have a clear view of whatthey want to get out of it, clinically and financially speaking. Thelatter can be challenging to determine, particularly fororganisations that are new to joint ventures and shared services(especially when compared to private sector organisations, whowill have a clear view at the outset of what their financialobjectives are)."

The FutureNHS Shared Business Services has realised over £220million’ ofsavings for the NHS, but there needs to be many more successstories for shared services to become truly fashionable. Anupcoming collaboration between the Royal Free, UniversityCollege London Hospital and North Middlesex Hospital NHStrusts is a £1billion contract that melds 8 parallel outsourcingdeals into one epic shared services effort. It’s a ground breakingpublic-private partnership, the most complex ever attempted inthe NHS - and if it delivers the expected benefits (confidentialitypresents us from disclosing what they are at current stage ofnegotiations as we go to print) it will be the envy of NHS leadersthe length and breadth of the country. Is this the kick-starter of anNHS shared services revolution? Only time will tell.

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Case Studies


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Case Studies

The BBC’s Dave Wyer discusses mitigating operational risk in outsourcing contracts

The BBC is a prolific, highly proficient, multi-award-winning outsourcer. It successfully contracts out a rangeof functions from BPO to technology, facilities management and audience services, all feeding in to acustomer-centric vision of driving maximum value for the licence payer in everything it does.

Outsourcing Yearbook 2015 caught up with Strategic Supplier Development Manager Dave Wyer todiscuss the ethos and strategies that ‘Auntie Beeb’ employs to get the best of its outsourcing relationships.


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The challenges the modern BBC faces.DW: “The BBC recognises that whilst we are experienced inmanaging outsourcing services - in many cases the contractsare 2nd or 3rd generation - we are, like many otherorganisations, facing significant challenges, mostly around thepace of change. Not just in terms of technology, but in the waythe BBC operates, in response to the exponential increase inthe way services can be provided: cloud, robotics, multi-channel, single sourced or multi-sourced, managed service or managed solution or outcome based contract, to name but a few. “At such a pace of change, intelligent, proactive managementof ‘bleed across’ and merging of services is vital. We are alwayslooking to collaborate with our existing suppliers to derivegreater value, in terms of enabling creativity and innovation, toimprove services, while never allowing them to becomeexcessively bespoke: when relationships grow organically,services can be difficult to untangle when you want to go backto market, and tricky to integrate smoothly with other activities. “Alongside all this, the licence fee is currently frozen.Therefore, we have a flat income stream, in a wider businessenvironment that is becoming more buoyant. Suppliers, andother organisations that bid on BBC contracts, may beawarding their staff pay increases, which is likely to increasetheir costs. Clearly it would not be in the interests of the licencepayer - which is naturally an ever-present considerationregardless of what BBC function you’re working in - to absorbthese extra costs. We are looking to get greater value for ourmoney, not less, and we work closely with our suppliers toachieve this.”

Outsourcing is risky business The BBC has a meagre appetite for risk, but is hungry forinnovation as it seeks to right-package the perfect array ofservices to support its future vision and change agenda. Dave Wyer: “When you are outsourcing with multiple suppliers,each bringing varying degrees of transformation and change,you are, in effect, building a portfolio of risk. Managing eachcontract in isolation exacerbates the situation and inflates thecumulative weight of what is already a significant risk, where theimpact of failure can be enormous. The first step is to identify those things that constituteportfolio risk, then monitor the likelihood and impact of themoccurring. We also try to achieve a good level of continuitybetween negotiation and implementation teams, with regularreviews once the contract / service is in place. “Another risk is value leakage, which we try to mitigate

throughout the whole of contract life cycle. We have establisheda ‘support and challenge’ community who are themselvessupported by a development programme. Sustainable

improvement is not delivered in the acquisition phase alone, aseach phase has a clear impact on all the others - to avoid thedreaded value leakage we must pay close attention to allstages, at all times.”

The STAR Forum The BBC STAR Forum is an organisation-wide group that bringstogether all of the contract managers and sponsors of BBCstrategic outsourcing deals, giving them a ‘home’ where vendormanagers working in distinct divisions can enhance theirknowledge of what is going on outsourcing-wise, both insideand outside of the BBC. The forum meets quarterly to report on the finer points ofcontract management, and is well attended by seniormanagement and board executives. This collaborative approachexemplifies a vital keystone of the BBC’s strategic direction: thewill to “improve value for money through a simpler, moreefficient and more open BBC, by building more new creativepartnerships, and engaging staff with the strategy.” DW: What germinated from recognising a need to treatstrategic suppliers differently from smaller, tactical providers,has grown into the STAR Forum, a pan-BBC function thatmonitors the hygiene and welfare of the relationships with our14 key partners. There are two main benefits to the forum. Thefirst is that robust communication links allow the BBC to take aportfolio perspective on its risk, creating a sharp picture of thecumulative risks at play. This helps us work smart to minimisethem, such as constructing performance measures aroundsuccessful risk mitigation. We go beyond examiningdashboards to consider questions such as “are there too manyconcurrent activities on the go?” and “are the right support anddevelopment programmes in place?” In doing so, we create aculture of shared learning, where vendor managers can debatebest-in-class practice and enhance their industry awarenessround current thinking on supplier management. “The BBC dashboards and toolkits that inform the debateallow comparison not just of results garnered, but the efforts ittook to get there, and efforts scheduled to take us to the nextlevel. We compare and contrast activity timelines, potentialdisruptions and pain points, pre-procurement preparationefforts, alongside more traditional dashboards like KPIs, SLAs,spend/savings targets and customer satisfaction and changerequests.” “A huge benefit of having this data-driven portfolio approachis that we can quantifiably articulate risk to a group of seniorexecs with the decision-making powers to do something aboutit. Clarifying and scoring the risk means, if it’s at unacceptablelevels, resources can be allocated, and solutions sought. Sometimes risk sits across divisions, everyone knows about it,but no-one ‘owns’ it. If the risk doesn’t sit with anyone, no-one

Case Studies


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has the power to do anything about it, and problems can buildin the cracks between responsibilities. The STAR forum hasattenuated this risk significantly.”

Making Career Paths Optimised supplier management and therefore, minimaloperational risk, is not simply about tools, M.I. and goodprocesses - it’s powered by having high-calibre outsourcingmanagement professionals. To those in the know, this is a factof life, but one problem the STAR forum has highlighted is thewidespread lack of external recognition of the specific skills andattributes that it takes to get the very best value out of strategicpartners. In the BBC, there is no concrete career path for thosepeople who manage strategic suppliers - something that theSTAR forum members are working hard to change. DW: The STAR forum and associated reporting is bringing agrowing recognition from senior management that what we dois hugely significant, and takes skill, tenacity and adroitleadership capabilities. “Board room visibility of what we do - and how missioncritical it is - is absolutely vital, if we are to make strategicsupplier management an attractive function to the cream oftalent, and equally, be recognised as a platform for thosepeople to kick on. “To this effect, we are working with the BBC College ofLeadership to strengthen the linkage between thosecompetences needed for outsourcing management and seniormanagement level competences. “Running relationships that are principled, rather thanpositional, is no mean feat, and there is a growing feeling thatmanaging strategic suppliers is a strong proving ground for theleaders of the future, as situation analysis, negotiation anddecision-making are always to the fore... creating career pathsfor quality talent is of huge benefit to all concerned. As wecontinue to develop our people, they in turn help to continuallyimprove the tools and processes by which we manage oursuppliers. We’ve developed a layered view that follows traditionto a certain extent, in terms of a progression from foundation, topractitioner, to expert, to commercial leader - the leadershipprogrammes’ syllabus and competences will soon reflect howsupplier managers’ own capabilities and workloads comparefavourably with more ‘traditional’ competences that evoke goodleadership, and thus feature on course syllabuses. After all,relationship managers provide leadership to internalstakeholders as well as suppliers, so those who are good at itdeserve the recognition.”

Results /Benefits of STAR ForumThe BBC has an unrelenting flow of re-procurements underway,

powered by a strong desire for continuous improvement - theSTAR forum ethos has gone a long way to making sure theyhave the robust processes and skilled people to achieve this. “The ‘support and challenge’ nature of the STAR communitymeans we are best equipped, skills-wise, to add value pre-and-post contract award. Another benefit is that by spreadingknowledge on the mechanics of contract management, we nowalways follow up on contractual obligations, in terms of openbook audits, benchmarking and gain-share etc, we have theskills and confidence to make sure we get the most value out ofsuch provisions.”

The FutureDespite having achieved enviable cost savings and added valuealready, the BBC is forever looking to improve. DW: We’re looking into expanding the wider STAR community,building career paths and continuously looking for ways to worksmarter with suppliers. There is still a significant amount ofspend sitting with non-strategic suppliers, so expanding theSTAR group to include those who manage such arrangements,via STAR-sponsored workshops and suchlike, spreading themessage of contributing positively to adding value throughoutthe contract life cycle through the entirety of the BBC. We aimto reach the point, and I think we’re getting there, where peoplein the most senior procurement positions are asking ‘whyhaven’t we got contract management as a discipline in its own right?’

Dave Wyer’s Top 10 Governance Tips1 Don’t put the contract away in the draw – know it, work within it and change it if necessary2 Do risk management – don’t focus on fire fighting, have a longer term view3 Have clear escalation routes and ensure issues don’t fester4 Know that you’re getting what you pay for – combine financial and performance management5 Have clear and understood roles and responsibilities – work hard to ensure stakeholders understand too6 Don’t hold meetings for meetings sake – avoid ‘orphaned’ meetings with no input or output7 Build a ‘lessons learned’ culture – and don’t rely on traditional document methods for capturing learning8 Understand the supplier perspective9 Understand the customer perspective10 Create the right ‘retained’ team – strike a balance between size and capability

Case Studies


European OutsourcingAssociation Awards

Lisbon, Portugal Thursday 17th September 2015

Now in its sixth year, the EOAAs will bring together some of Europe’s leadingoutsourcing suppliers, support providers and buyers. Best practice will be rewarded

and celebrated, and the efforts of companies and individuals who have demonstratedexcellence in the outsourcing world in 2014/15 will be recognised.

Taking place on the same day as the EOA Summit, this event is a must for all thoseinvolved in European outsourcing.

There are 12 categories up for grabs and the deadline for entries is Friday 8th May 2015.

For further information on how to enter please visit the NOA website

www.noa.co.uk


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Outsourcing Yearbook invited the NOA’smost active members to share some oftheir top tips for success, general adviceand industry knowledge. With over 100years combined experience, youroutsourcing dilemmas may be answeredin our outspoken section…


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OutspokenOutsourcers


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Outspoken Outsourcers

Alison HaighHead of Procurement UK Asset ResolutionNOA Diploma StudentMy top tip for someone who is outsourcingfor the first time is to be really clear on the

objectives and decision making criteria and ensure that allstakeholders have a common understanding from thebeginning of the process. It is also important to have a seniorinternal sponsor. If the decision is taken to outsource,particular emphasis should be placed upon the overallrelationship objectives desired by both parties for the lifetimeof the relationship. Often the intent of the relationship can belost and relationship objectives should be built into the overallgovernance and revisited and refreshed accordingly to ensurelong term success is delivered.

Top tips from our 2014 spotlights

Martin Edwards Senior Outsourcing ConsultantInfosysNOA Diploma Graduate and FellowMy top tip for someone who is outsourcingfor the first time is:

Don’t panic! Outsourcing for the first time can seem like adaunting proposition. But there is a wealth of information andexpertise readily available to help you get started. Beforedoing anything, to look at the guidance, training andeducational material readily available from the NOA. TheAssociation offers valuable tips, training, hints, toolkits andnetworking opportunities. You can learn from the lessons ofothers and get your own outsourcing project off to a flying start.I’d recommend the NOA Outsourcing Lifecycle in particular.

John McKinlayPartnerDLA PiperNOA Professional Award WinnerThere is nothing more important than gettingthe requirements correct - everything flows

from these. However, the sheer effort and difficulty in gettingthis right is massively underestimated, so I would run thisexperiment. Pick a part of the service, then try to write downthe best description you can for your requirements. Spend a bit

of time on this and get something you would be prepared tostand behind. Then share it with those in that area, and see ifthey can improve it. After that, send it to other departments inthe organisation that interface with the service, and get them toadd things that may have been forgotten. Finally, share it withsomeone outside the organisation who works in this area, toget their perspective and the benefit of their experience. Onethis is complete, compare it with the original version… now youunderstand the task ahead - and are ready to meet thechallenge of doing this for real head on!

Petteri UljasCEO Northern Europe (UK & Nordic)CapgeminiWhen outsourcing, please bear in mind thatyou can never really outsource theaccountability. If things don’t work out as

planned, at the end of the day it is still you and your businesswho will be responsible, rather than the outsourcer. Choose apartner you can trust. Take the time to build a goodrelationship with your outsourcing partners as your successdepends on them.

Do not underestimate the need to have good governance inplace. You need good governance at both a strategic,operational and a tactical level. Be sure to share yourbusiness views and values, as with any relationship, the moreyou give the more you get.

Richard Mills Head of Sourcing & Standards - Central OperationsZurichBe clear about why you are outsourcing to athird party to start with. This sounds obvious,

but the common mistake I see time and time again is tooutsource purely to save costs or to apply a quick fix to anoperational/business issue, which may work in the short termbut is not a long term sourcing strategy I would recommend.

If you work on the premise that you have outsourced to athird party to leverage either operational flexibility, overallvalue creation and/or professional expertise then you are reallylaying solid foundations for a credible sourcing strategy whichwill pay dividends for years to come.


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David Lewis Vendor Management Office, IT OperationsMarks and SpencerNOA Professional Award Winner and FellowContracts have their place, but nothing

beats good relationship management with appropriategovernance and wherever possible rather than demandingthat you want to work with the suppliers A team, build aworking environment whereby the suppliers A team want towork with you, otherwise you’ll get the supplier you deserve.

Alistair Niederer CEO Teleperformancea. Top tip? I would say the absolute mustis to speak with CEO to understand his orher view of the company’s culture and drive.

Ever evolving procurement models (for very necessarygovernance requirements) can appear to diminish theopportunities for direct communication with the company’sboard and the CEO in particular, however, outsourcing is amajor component of many of organisations long term strategyand represents a major investment, getting to know andunderstand the person who’s responsible ultimately for thesuccess of that strategy is fundamental. b. Next, ensure the chemistry at multiple levels existsbetween your key executives and operatives and their peers inthe outsourcing enterprise. They will be working together todeliver a significant project to support your business. Whenyour key people tell you they’re enjoying a fully engagedprocess across all business function areas, then you know thechemistry is there which will be of huge importance whensetting out on your journey together.c. Make sure your company knows what it is looking for andthen see if that resonates with the outsourcers view and thenenhance. Really it’s an obvious part of the preparation yourcompany undertakes to ensure it is fully cognisant of thebenefits of outsourcing it is seeking to achieve and why.Remember the outsourcer will have an extensiveunderstanding of the business challenges impacting manysectors and will have worked with similar organisations, inboth the scope and scale of the outsourced services to beprovided. They should become your resident ‘guru’s’ bringingthis experience and expertise to your table as a matter of course.d. Talk to the existing clients. It sounds obvious but inprofessional life this is often overlooked or it’s tagged at theend of the procurement process. In my experience, most newclients will make the necessary contact and it is a straight uptest of performance which will help you in your decisionmaking.e. Go meet the teams. Don’t skimp on the travel tab! Ifyou’re going to take up on the tips above, especially thechemistry, resonance and culture of the company you’re aboutto engage with, go see them, have dinner with them, go to theraces or whatever it might be. It might be easier or moreexpedient to send emails, have conference or even videocalls, but nothing can replace that uniquely human interactionof face to face introductions and discussion.

William PattisonCEOMindpearlEOA Award Winner and FellowIn my opinion there are three essentials foranyone to consider before outsourcing for

the first time – performance, partnership and people.

PerformanceSince outsourcing first became popular, locations such as thePhilippines and India have dominated the market withpossibilities of low rates and reduced operational costs. Thisfocus on cost alone can come at a price, many businesseshave had their contracts withdrawn as a result of a series ofqualitative problems. This has provided the space forcompanies like Mindpearl and high quality locations such asFiji and South Africa to move forward in the market.Outsourcing is a great way to significantly cut your overhead,but do your research. Price cannot be the only decidingfactor.

PartnershipRemember you are looking for a partner, not a supplier. Whenyou outsource, you trust your most valuable asset to a thirdparty – your customers, your brand and your revenue.Partnership ensures the end result to the customer experienceis an authentic and seamless contact with your brand!

PeopleDon’t forget about the people. How are they trained? How dothey interact with your customers? Are they able to protectand live your brand? How are they treated? After all, youroutsourcer’s people will be the first point of contact with yourcustomer. Happy employees, equal happy customers!


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Lose the fear!Change management and transformation is one of the trickierthings for businesses to handle and is an area particularlyrelevant to outsourcing. It causes friction and fear in businessesand has a relatively high failure rate. Because of this it is oftenlooked on as a dangerous time and is approached by thebusiness with a feeling of fear and uncertainty.

However, if you look at the businesses who handle change wellthey are usually the ones who have change as part of theirbusiness as usual. It isn’t something imposed from above on anirregular basis but is something the company does every dayand is as much a part of the business as selling their product orservice.

In the outsourcing industry this management of change, andbuilding it into the corporate DNA, is largely a clientresponsibility but the supplier can help. It involves staffinvolvement in change, rather than it being imposed, and ademonstration of the benefits of change. This is a cumulativeprocess as successful change encourages acceptance of morechange and that acceptance increases the chances of success.

If you can break the cycle of fear and get people to embracechange then you are a long way down the road of lowering therisk of change and increasing the success rate and improvingthe success of your business. Not easy but, if you can achievethis, well worth the effort.

Procurement can be seen as a layered “stack” of activitiesworking at different levels and with different benefits andoverheads. I will describe the stack and how it applies toOutsourcing.

At the base level there is purchasing which is the activity ofrequisitioning, ordering, checking the delivery and paying the

supplier. This is the engine room of the supply chain. There istypically no procurement optimisation or value derived but mostof the organisation resource sits in this layer manhandling POs.The next level is basic procurement which typically operates atthe lowest competitive level, specifying items to buy, gettingcompetitive quotes and ordering items. Again this layer deliversonly spot value and yet consumes significant resource oftenfrom the financial management community.

The next layer is strategic procurement. This is generally thepoint at which Category Management and properly leveragedand negotiated deals are done, where benchmarking and costevaluation take place and where collaborative procurement isconsidered and executed.

Above this sits sourcing and at the highest point strategicsourcing. This layer contains make or buy decision making,designing, creating, executing and managing services,outsourcing, business process outsourcing and partnershiparrangements. It is at this level where the experienced andskilful procurement professional can most influence thebusiness direction and deliver the greatest benefits in terms ofproviding strategic advice, supplier and market intelligence,contracting, SLA and performance and commercialmanagement for the contract term.

Clearly from this it can be seen that an enlightened companywill want its best procurement resource supporting its projectand strategic transformation teams, yet I constantly see thescarce and hard pressed procurement teams bogged down inthe purchasing layer unable to give themselves sufficientheadroom to think at the strategic level.

My advice is to put in place a lean and efficient purchase to payprocess and associated system and drive this system to free upthe procurement and financial teams to move up the stack anddeliver strategic supply chain solutions to the business. P2P willgive you spend analysis which will identify opportunities toconsolidate spend, standardise, leverage – and save.

Derek ParlourDirectorDJA Business Solutions

Jim ReedDirector of ProcurementUniversity of Nottingham

...an enlightened company will want its bestprocurement resource supporting its projectand strategic transformation teams...

Mugshots are blurry - can we get betterversions?


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Big outsourcing means big problems?Given the problems now facing our leading outsourcers, likeIBM, HP and others could it be that outsourcing doesn't providethe profits that these companies expect?

After all outsourcing only works through economies of scale,not just cheaper end user pricing but higher service levels fasterprovision access to specialist skills etc.

But as certain suppliers take even more business from theirfavourite customers their services become less and less in the"economies of scale" zone, meaning they become more andmore like their customer and less able to acheive the economiesrequired to be effective outsourcers. And they have to make aprofit too! Even if they took a loss leader, as the market picks upthe only loss will be with the customer as resources move tomore profitable customers.

So whose fault is this? after all a failing supplier is of no use toeither customer or supplier! so should customers makes surethat what suppliers are agreeing to really makes sense forthem? Do suppliers go too far in trying to Hoover up every bit ofbusiness? Maybe to keep competitors out?

My view is that customers should make sure what they areproposing is outsourceable, in other words makes sure theyknow where the economies of scale are.

If you don't know how does your potential supplier?

So maybe there is a limit on the size of an outsourcingcontract? Maybe there is a natural order of things? Asoutsourcers get a major slice of their clients pie they get lessand less opportunities for economies of scale and also their sizemeans they need to run a bureaucracy too, plus make that profit!

So does big outsourcing really mean small suppliers?

Martyn HartFounder and Director of the NOA

Cloud is here to stay and 2015 will be the year of the hybridcloud. Key service providers will not only offer a set of differentcloud (and some non-cloud) delivery models and services tomatch the diverse workloads of their clients but they will alsomigrate a significant amount of new and existing clientworkloads to “the (hybrid) cloud”.

This in turn will drive a renewed focus on service integration andbroker services to manage the complexity and often multi-vendor environment that this will bring.

Related to cloud - but it would happen anyway – there will be ahuge focus on cyber-security and related services asenterprises understand the huge scale of the challenge andacknowledge that they increasingly need specialist support thatsimply can’t be delivered in-house.

IT will continue to industrialise and automation will continueapace – not just of build and deployment activities in the cloudbut of an increasing level of service management and supportactivities.

Market leading providers will increasingly deploy advancedanalytics and cognitive approaches (such as IBM Watson) tomake use of the fantastic data collected on the services wesupport. Words like “predictive” and “autonomic” used yearsago will become real as techniques already applied for businessadvantage are applied to the task of intelligently managing ITsystems.

My message to clients - ensure your suppliers focus on the aboveFOR you and deliver a wider innovation agenda WITH you.

Tony MorganExecutive Architect and Client ChiefInnovation Officer,IBM Global Technology Services StrategicOutsourcing Europe

Do suppliers go too far in trying to Hoover up every bit of business? Maybe to keepcompetitors out?

...there will be a huge focus on cyber-securityand related services as enterprises understandthe huge scale of the challenge...


noa outsourcing yearbook 2015

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