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.
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
p90-93 DLA piper APP.indd 90
Table of Contents for the Digital Edition of outsource issue 31
Keys to Driving Supply Chain Outsourcing Success
Biography of a Carve-Out
Culture and Values
Redefining the Law Firm Delivery Model
Sharing the Glory
Breaking the Outsourcing Conundrum
Back from the Summit
Losing the Race Before You Put On Your Trainers
Innovate to Accelerate
Making an Impact
Home or Away?
Dead and Buried?
So What Now?
The Legal View
The Deal Doctor
The Last Word
outsource issue 31