Outsource Issue 30 - (Page 40)

Our Survey SayS… Outsource and DLA Piper got together earlier this year to launch a survey asking “what’s the point of outsourcing?” With the first raft of data in, it’s time to look at the results… Duncan Pithouse, DLA Piper Duncan Pithouse is a Partner with DLA Piper, specialising in non-contentious technology and sourcing matters, and focussing on complex international outsourcing contracts. He advises on a wide range of outsourcing transactions and all aspects of a client’s sourcing requirements. T hank you to all of you who completed the survey. Over the course of this article and a feature in the next issue of Outsource we will review the results and generate a perspective of the outsourcing market now, and the likely trends for the future. What’s stopping outsourcing? What is clear is that outsourcing companies seem to be facing the same issues today in putting together an outsourcing agreement as they have been for a number of years. It is interesting that prolonged negotiation is by far the biggest issue in getting outsourcing deals to signature. Forty-eight per cent of respondents identified this as the biggest barrier to getting to signature. This is the case even though 45 out of 107 respondents indicated that the key reason for entering into a deal is to achieve cost savings. So there seems to be an inherent tension between needing to deliver cost savings and benefits and the taking of around nine months to get to signature – so slowing down the time to achieve those benefits. Do these data points indicate a lack of maturity in the market in that buyers and suppliers actually struggle to do deals quickly, or a lack of application of “knowhow” to cut through issues? We raise this specifically given the arguments that certain outsourcing is moving very much towards a commoditised model these days. If this was the case, then one would have expected that the time to signature would be relatively quick because the degree of negotiation would decrease. In fact, the two big issues influencing time to signature are: first, the time it takes to make decisions; and two, pricing and value. So, perhaps this does indicate that the services are becoming more standardised, but that the perspective on pricing and value (which is one of the key issues to influence the decision-making) is not. The reality is highly dependent on the state of readiness of the buyer both in terms of the preparedness to enter into the negotiations, in terms of negotiating stance readiness, and business case development. This certainly seems to be the case for at least half of the survey respondents as a direct 50 per cent indicated that customers were finding it harder to get business cases for outsourcing agreements approved, with the two largest underlying reasons for this being internal cost pressures and a perspective that the deal is not strategically important enough. In an economy where any investment needs to be significantly justified as well as offering a material “pay-back” (by way of cost reductions), the hurdle to get outsourcing deals approved seems to be rising. It’s not entirely about the money however. Access to skills and a flexible workforce remain key drivers for entering into outsourcing deals, demonstrating the value of outsourcing beyond the bottom line reductions and into the improvements that can be delivered as a change management tool and improvements to the business activities. It is, though, the balance between driving the right price as against ensuring quality that remains critical; inevitably quality comes at a price. In fact a number of respondents indicated that capacity and skills are more important than cost savings. “USA Today has come out with a new survey – apparently, three out of every four people make up 75 per cent of the population.” – David Letterman 40 ● ● www.outsourcemagazine.co.uk http://www.outsourcemagazine.co.uk

Table of Contents for the Digital Edition of Outsource Issue 30

Peering through the fog
Who moved my world
Bringing on the beeb
Courting the commentariat
Everyone is responsible
Our survey says
Fast money
Smarten up
Seeing the biggest picture
NOA round-up
Embracing enterprise innovation
Customer matters
Application development outsourcing
India: rules for offshoring
Talent gap
The Professionals
Book learning
The outsourcing jigsaw
The legal view
Top ten
NelsonHall round-up
Online round-up
The deal doctor
Inside source
The last word

Outsource Issue 30