outsource issue 31 - (Page 90)

So What Now? Over the last two issues, DLA Piper have reported on a survey run in collaboration with Outsource, looking at the outsourcing status quo and what’s driving – and hindering – the market. In this concluding article, the lens is turned to the future as we look at what our survey respondents believe will be coming up over the next five years… Kit Burden, DLA Piper Kit Burden is a partner at DLA Piper. His main areas of practice include complex technology and sourcing transactions – including in particular ITO and BPO, systems integration, ERP and CRM implementations, and joint venture operations. O ver the past two articles in this series, we have considered the history of outsourcing and its current state. Now, to complete our series of articles, we look at the future of the outsourcing market, and where it might likely to be in the next five years. Is outsourcing dying? We asked, in our first article, about the point of outsourcing, and whether it was a sustainable business model. A trend that arose in our second article was that outsourcing seems to be taking longer to get to signature, and more difficult to have approved from an internal business case perspective. It’s interesting, therefore, to see that the survey demonstrated that over the next five years the scale and rate of outsourcing is expected to grow, with respondents expecting to outsource more in five years’ time than they currently do. Our own experience is that businesses that have historically shied away from outsourcing are beginning to embrace it. The debate over whether outsourcing programmes move “up the value chain” in terms of the complexity of the deals and the proximity to their core business activities demonstrated a fairly even split of opinion. Many respondents felt this was not likely – at least on a long-term, decisive basis but perhaps more likely on a “drift” basis. Others, however, felt that the move to outsourcing core activities was inevitable provided quality can be guaranteed. It is one of the more interesting predictions for the financial services outsourcing market over the next 12 to 18 months that there will be greater intrabank outsourcings. These have historically been limited to product administration, but could move into a new phase of a broader outsourcing, which because the service provider bank is also providing the services to itself, would go a long way to assuaging any quality concerns. Intra-bank outsourcing would also solve, at least for the banks, another key hurdle to the outsourcing of core activities – regulatory compliance -– as each bank would be outsourcing to an entity that was also appropriately set up and compliant with the relevant laws and regulations, so perhaps removing one of the traditional “battlegrounds” for negotiation, as we saw in our second article. Likewise, a very significant 74 per cent of respondents saw no possibility of insourcing functions that were currently outsourced, perhaps demonstrating that once outsourced a function becomes very difficult to bring back in-house. It’s not impossible, of course, with the right contract terms, and the right level of investment, not to mention commitment. The apparent acceptance that once something is outsourced it stays outsourced is probably, partially at least, due to the problems associated with insourcing. What will outsourcing look like in five years? Most respondents seemed to indicate that the current structures of their outsourcing programmes would be unlikely to change over the next five years. In particular, 86 per cent felt they would not move from a multisupplier model to a single-source model. On the other hand, 43 per cent felt that they might move to a multi-vendor model. The key reason for an expected shift towards the multi-vendor model is the need “Even when one is doing well, one still worries that things might go badly again in the future. This is an old observation based on human experience.” – Wolfgang Schauble 90 ● ●● ● www.outsourcemagazine.co.uk p90-93 DLA piper APP.indd 90 22/3/13 11:46:34 http://www.outsourcemagazine.co.uk

Table of Contents for the Digital Edition of outsource issue 31

Upwardly Mobile
Keys to Driving Supply Chain Outsourcing Success
Biography of a Carve-Out
Culture and Values
Redefining the Law Firm Delivery Model
Sharing the Glory
Norn Ironman
Breaking the Outsourcing Conundrum
NOA Round-Up
Back from the Summit
Losing the Race Before You Put On Your Trainers
Innovate to Accelerate
Comparing Clouds
People Power
Making an Impact
Home or Away?
Dead and Buried?
So What Now?
The Legal View
Top Ten
NelsonHall Round-Up
Sourcing Sage
Online Round-Up
The Deal Doctor
Inside Source
The Last Word

outsource issue 31