Customers want to know that potential outsource service providers can do the job properly and do it at a lower cost, but flexibility and service remain the difference between failure or success, says Andrew Holden, MD of Bytes Outsource Services.
Price remains the top consideration when deciding to outsource, but a close second is whether or not service providers can live up their service delivery claims. Other, less important, reasons include an internal focus on core functions, better and consistent quality and access to new technology or skills.
Yet it is significant to note that, in KPMG's first global outsourcing survey, 42% of customers have no formal strategic measurement framework in place.
And outsourcing is growing increasingly popular. Frost & Sullivan's report, EMEA Contact Center Outsourcing Market, reveals that the market earned more than $11 billion in revenue in 2006 and estimates that it will reach $16 billion in 2012. Reasons cited include: cost reductions, focus on core competencies and economies of scale.
Cost savings are easier to determine than whether or not an outsource service provider can deliver the goods. Metrics exist for factoring the total cost of outsourcing, including travel tickets for managers to regularly visit service providers.
It is absolutely critical for customers to know that outsourcers can live up to their marketing claims. A report by Compass Management Consulting found that language barriers led to lower offshore productivity, with comprehension problems in 18% of offshore call centres as opposed to 4% of local UK centres. While outright failure is rare in the industry, it has occurred. Some companies skirt the issue by working with multiple service providers, while others analyse the risk and outsource operational components that can accept the risk.
But the only way for companies to assess potential partners' ability to deliver is to insist on a client list and reference those with similar interests to themselves. Companies must ask reference sites if the service provider is flexible. EquaTerra conducted an Outsourcing Pulse Survey at the end of last year that found buyers, service providers and outsourcing advisors view renegotiations and restructurings as catalysts and opportunities to improve deals.
Companies also need to ask reference sites what service delivery is like. That is not just about meeting service level agreements (SLAs).
KPMG discovered through its survey that outsourcing is strictly a people business and is based on relationships between providers and customers.
60% of customers claim people issues for problems with outsource service providers. Only 13% blame technology. That is according to a sample of 650 businesses in 32 countries.
But standardisation, which drives down costs for service providers and ensures standard response times and consistently high quality delivery at a predictable cost, makes service providers less flexible. Public transport infrastructure offers a good analogy. Trains can transport large numbers of commuters cost effectively. But only at fixed times and between fixed destinations. Taxis, on the other hand, are immeasurably more flexible in destinations serviced, but at a premium.
Finding a happy median between flexibility and price relies heavily on a good relationship that enables joint planning. Where customers'
organisations are headed will impact their technology and service requirements. Service providers will be able to change their strategies and approaches in order to meet customers' needs or customers can find the right partner for their needs.
Price and ability to execute form the basis of a good offshore outsourcing relationship, but service and flexibility underpin a cooperative drive toward aligned goals and rewarding futures.