Wells Fargo and Vested Ideas

Six leading outsourcing advisers have some interesting things to say about the current state of outsourcing, a good portion of them right in the Vested wheelhouse.

Wells Fargo Securities recently issued its forecast for the outsourcing industry based on a conference call with outsourcing analysts at Alsbridge, Deloitte, Everest, HfS Research, KPMG and PwC.

The basic thrust of the session, as highlighted by the International Association for Contract & Commercial Management on its website is that outsourcing is transitioning to “more complex solutions and likely slower growth.”

The transformation occurring in the outsource arena—away from the simple “lift and shift” approach to cost-arbitrage driven deals, for example—is helping to fuel that complexity. Lift and shift is diminishing as opportunities to save costs and improve efficiency “now require clients to make more substantive process changes, especially for larger clients.

“This should require service providers to enhance knowledge of client’s end market, a theme that many of the leading providers have increasingly been discussing of late,” the Wells Fargo summary continues.

A key component of the Vested approach is for the company and the service provider to understand the business and the outsourcing enterprise at hand in order to better align their interests, collaborate and share the value they create.

That leads to the next point in the forecast: greater use of shared services. “Increasingly sophisticated clients are shifting efforts to the management of sourcing solutions leveraging a mixture of external service providers and internal shared service centers.”

That follows the Vested rule of focusing on the what, not the how. In other words not overseeing every aspect of the outsource arrangement and rather letting the service provider—the expert the company has hired to handle a non-core function in the first place—do its job without micromanagement.

The Wells Fargo forecast also notes the shift to outcome-based pricing is “picking up.” That is definitely a great trend and yet another Vested principle: focus on outcomes, not transactions.

The Vested business model removes the conventional transaction-based approach between the company and service provider and creates instead an outcome-based environment. Essentially the service provider is no longer a robotic bean-counter but is focusing on the outcomes of the outsourcing services it is providing. Those outcomes are achieved through alignment, innovation, collaboration and incentives.

I’m glad to see that these heavyweights are coming around. They may not be saying Vested outright, but they are thinking along Vested lines.

[Image: Wells Fargo by Steve Rhodes via Flickr]

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