Outsourcing is No Longer “Out There”

Even as outsourcing becomes more and more mainstream confusion remains about its relationship to offshoring says Deloitte, the highly regarded tax, audit and financial consulting firm, in its latest survey on the topic.

“The outsourcing market continues to confuse outsourcing with offshoring,” Deloitte says. “Many respondents still see the two processes as inseparable – even though many times outsourced work never leaves the originating country.”

I’ve beating that particular drum for years now, but unfortunately outsourcing still gets a bad rap when the general perception of it is that it is simply “shipping jobs overseas.” That’s way too simplistic: As we all know, there’s much more to outsourcing than layoffs and foreign relocation. In fact most of the outsourcing that I deal with—as Deloitte notes—involves bringing companies here in the U.S. together with service providers that have the expertise to perform non-core functions, such as finance, back office or BPO functions.

Deloitte’s 2012 Global Outsourcing and Insourcing Survey received responses from 23 countries and 22 industries—the findings mostly were really encouraging about the future of outsourcing and the importance of collaboration and the partnership relationship.

For instance, 60 percent of the respondents said outsourcing is a “standard practice” in their company, while 19 percent said they are considering it. “Information Technology, Finance, and Human Resources continue to lead the business processes in outsourcing, although all business processes are expecting to see increases in the use of outsourcing and offshoring in the near future,” the survey report says.

When asked about the factors and components that are most critical to a successful outsourcing relationship almost 55 percent of the respondents pointed to a “spirit of partnership between client and vendor” as either very important (49 percent) or important (15 percent).

No other categories on the list of factors exceeded 50 percent: next in order of importance were a “well-engineered service level agreement” (43 percent), and strong client/vendor governance (29 percent). Meanwhile only 8 percent of respondents said detailed contract terms and conditions are very important; coming in last, just 6 percent said a strong internal vendor management team is very important.

Those numbers tell me that changes—and Vested ideas—are indeed taking hold in the outsourcing arena, from the recognition of the ultimate importance of a “spirit of partnership” to the realization that the service provider—the expert called in to handle a company’s non-core function or functions—does not need an internal vendor management team overseeing its every move.

Those are very positive developments for the industry, but there is still a lot of work and education needed.

Deloitte also says that vendor management organizations, “while highly competent at day-to-day activities, find themselves underutilized when it comes to driving strategic value.” That’s a recipe for a failed long-term partnership.

The Vested model brings a wealth of resources to the table designed to align the parties so that they create and share value for the collaborative win-win.

When that happens, outsourcing will operate in the mainstream and dispel that offshore/jobs perception.

[Image: Deloitte by happy via from Flickr]

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