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Beyond outsourcing: Entering a new sourcing ecosystem

Mar 29, 2023 | Artikel

Deloitte Global Outsourcing Survey 2022

What is the Deloitte Global Outsourcing Survey 2022?

The Deloitte Global Outsourcing Survey 2022 is a comprehensive report that captures the perspectives of nearly 500 executives from global organizations, shedding light on the current trends and future outlook of outsourcing across various industries. (2020 Global Outsourcing Survey | Deloitte US)

This article uses Global Outsourcing Survey 2022 as a source of information, combine with general information that runs throughout the report. Here is some question that gets an answer from it:

  1. How do we evaluate outsourcing vendor performance?
  2. How we improve outsourcing vendor performance?
  3. How do we measure the cost saving of using outsourcing?

These are the question about the Global Outsourcing Survey 2022 to know about report.

Who are the respondents of the Deloitte Global Outsourcing Survey 2022?

The respondents of the Deloitte Global Outsourcing Survey 2022 are executives from a range of industries and geographies. The survey did not provide a specific breakdown of the respondents by industry or geography, but it did note that the respondents represented a mix of large and mid-sized organizations across multiple sectors, including technology, financial services, healthcare, and manufacturing. The survey also noted that the respondents held a range of senior leadership positions within their organizations, including C-suite executives and heads of business units or functions.

What industry sectors are represented in the Deloitte Global Outsourcing Survey 2022?

The Deloitte Global Outsourcing Survey 2022 includes respondents from a range of industry sectors. While the survey did not provide a specific breakdown of the respondents by industry, it noted that the respondents represented a mix of large and mid-sized organizations across multiple sectors. These sectors include technology, financial services, healthcare, and manufacturing, among others. The survey aimed to gather insights on outsourcing trends and practices across industries and geographies to provide a comprehensive view of the outsourcing landscape.

What are the key findings of the Deloitte Global Outsourcing Survey 2022?

The Deloitte Global Outsourcing Survey 2022 provides several key findings on outsourcing trends and practices. Some of the key findings include:

  1. Finding, developing, and keeping the right talent with the right skills at the right price is more elusive than ever.
  2. Third-party delivery models continue evolving to unlock value: Operate Services.
  3. Cybersecurity and data and analytics are the top outsourcing priorities.
  4. Global in-house centers: Internal sourcing with intention is an alternative to third parties.
  5. Evolving from traditional vendor management to holistic ecosystem management.

The survey also notes that organizations are shifting their outsourcing priorities and needs from two years ago due to changes in technologies, ways of working, and borders expanding. The report provides insights into how organizations can navigate these changes to unlock the benefits of outsourcing services effectively.

After knowing the key findings of the Deloitte Global Outsourcing Survey 2022, we want to understand how organizations can effectively navigate the changes in outsourcing. The Deloitte Global Outsourcing Survey 2022 provides several recommendations for organizations looking to navigate changes in outsourcing effectively.

These are some of the questions I looked to get answered from the survey report.

How do we evaluate outsourcing vendor performance?

The Deloitte Global Outsourcing Survey 2022 notes that evaluating outsourcing vendor performance is a critical component of successful outsourcing relationships. The report suggests several key performance indicators (KPIs) that organizations can use to evaluate vendor performance, including:

  1. Service level agreements (SLAs): SLAs are contractual agreements between the organization and the vendor that define the level of service expected from the vendor. Organizations can use SLAs to measure vendor performance against agreed-upon metrics.
  2. Quality metrics: Quality metrics can include measures such as defect rates, error rates, and customer satisfaction scores. These metrics can help organizations evaluate the quality of work delivered by the vendor.
  3. Cost savings: Cost savings are a common reason for outsourcing, and organizations should track actual cost savings achieved through outsourcing to evaluate vendor performance.
  4. Innovation: Vendors can bring new ideas and innovations to an organization, and organizations should track the number of new ideas generated by vendors as well as their impact on business outcomes.
  5. Relationship management: Strong relationships between organizations and vendors are critical for successful outsourcing relationships. Organizations should track factors such as communication effectiveness, issue resolution timeframes, and overall satisfaction with the relationship.

Overall, these KPIs can help organizations evaluate vendor performance across multiple dimensions and ensure that outsourcing relationships are delivering value to the organization.

How we improve outsourcing vendor performance?

The Deloitte Global Outsourcing Survey 2022 suggests several strategies that organizations can use to improve outsourcing vendor performance:

  1. Clearly define expectations: Organizations should clearly define their expectations for vendor performance and communicate these expectations to the vendor. This can include defining SLAs, quality metrics, and other KPIs that will be used to evaluate vendor performance.
  2. Establish regular communication: Regular communication between the organization and the vendor is critical for building a strong relationship and ensuring that issues are addressed promptly. Organizations should establish regular communication channels with vendors, such as weekly or monthly check-ins.
  3. Invest in vendor management capabilities: Effective vendor management capabilities are critical for successful outsourcing relationships. Organizations should invest in developing their vendor management capabilities, including skills such as contract negotiation, relationship management, and performance monitoring.
  4. Provide feedback: Providing feedback to vendors on their performance can help them improve their services and better meet the organization’s needs. Organizations should provide regular feedback to vendors on their performance, both positive and negative.
  5. Foster innovation: Vendors can bring new ideas and innovations to an organization, but this requires a culture of innovation within the organization as well. Organizations should foster a culture of innovation by encouraging new ideas from both internal and external sources.

Overall, these strategies can help organizations improve outsourcing vendor performance by setting clear expectations, establishing effective communication channels, investing in vendor management capabilities, providing feedback, and fostering innovation. By taking these steps, organizations can build strong outsourcing relationships that deliver value to the organization over time.

How do we measure the cost saving of using outsourcing?

The Deloitte Global Outsourcing Survey 2022 suggests several ways that organizations can measure the cost savings of using outsourcing:

  1. Direct cost savings: Direct cost savings are the most straightforward way to measure the financial impact of outsourcing. Organizations can compare the cost of performing a function in-house versus outsourcing it to a vendor to determine the direct cost savings achieved through outsourcing.
  2. Indirect cost savings: Indirect cost savings can be more difficult to measure but can still have a significant impact on an organization’s bottom line. Indirect cost savings can include factors such as increased productivity, reduced cycle times, and improved quality that result from outsourcing.
  3. Opportunity costs: Opportunity costs refer to the benefits that an organization could have achieved by using its resources for other purposes instead of outsourcing. Organizations should consider opportunity costs when evaluating the financial impact of outsourcing.
  4. The total cost of ownership (TCO): TCO is a comprehensive approach to measuring the total costs associated with performing a function in-house versus outsourcing it to a vendor. TCO includes both direct and indirect costs as well as opportunity costs and other factors such as risk management and compliance.

Overall, these approaches can help organizations measure the financial impact of outsourcing and determine whether it is delivering value to the organization over time. By taking a comprehensive approach to measuring cost savings, organizations can make informed decisions about their outsourcing strategies and optimize their use of outsourcing services.

Conclusion

In conclusion, the Deloitte Global Outsourcing Survey 2022 provides valuable insights into how organizations can optimize their outsourcing relationships. Measuring the financial impact of outsourcing is a critical part of this process, and the survey suggests several approaches for doing so. By carefully measuring the direct and indirect cost savings, along with considering opportunity costs and TCO, organizations can determine whether outsourcing is helping them achieve their business goals and delivering value over time.
The survey also highlights the importance of strong vendor relationships and effective contract management in achieving outsourcing success.
Overall, the survey emphasizes that outsourcing can be a powerful tool for organizations seeking to optimize their operations and achieve strategic goals.

Definition:

TCO stands for Total Cost of Ownership. It is a comprehensive approach to measuring the total costs associated with performing a function in-house versus outsourcing it to a vendor. TCO includes both direct and indirect costs as well as opportunity costs and other factors such as risk management and compliance. By taking a TCO approach, organizations can gain a more complete understanding of the financial impact of outsourcing and make informed decisions about their outsourcing strategies.

Source:

2020 Global Outsourcing Survey | Deloitte US. Available at: https://www.deloitte.com/global/en/services/consulting/perspectives/gx-global-outsourcing-survey.html.

Unlock Outsourcing Potential: Cost Savings, Innovation & More

Mar 27, 2023 | Artikel, Studi Kasus, Tips

Short paper, 5-9 minutes reading
By: JD 20230327

Introduction

Outsourcing by definition refers to the act of hiring a third-party company or individual to perform tasks or provide services that are typically done in-house. This can range from simple tasks such as data entry or customer service to more complex functions such as software development or financial analysis.

In recent years, the practice of outsourcing has become increasingly popular among businesses of various sizes and industries around the world.

This trend has been driven by a variety of factors, including globalization, advancements in technology, and increased competition. As businesses look to reduce costs and streamline operations, outsourcing has emerged as a viable solution.

The goal of this paper is to provide a comprehensive guide to outsourcing for businesses that are considering this strategy.

This guide will cover:

  1. the benefits and risks of outsourcing,
  2. how to select an outsourcing provider,
  3. best practices for managing an outsourced team, and
  4. strategies for maximizing the potential benefits of outsourcing while minimizing its risks.

Benefits of Outsourcing

One of the primary benefits of outsourcing is cost savings. Cost savings happened because outsourcing makes businesses focus on their core competencies and leave non-core functions to third-party providers who can perform them more efficiently with flexibility in resource management. (Berg et al., 2020)

With outsourcing businesses also can access the broader resources and expertise of the outsourcing provider, which may not be available in-house. And outsourcing also enables businesses to scale operations quickly and efficiently.

Meanwhile, there are also dissenting views on outsourcing, with some arguing that it can lead to the loss of jobs domestically and contribute to a decline in quality as control over certain functions may be diminished. However, research has shown that these concerns are often unfounded and may even be outweighed by the benefits of outsourcing. For example, a study by Deloitte found that outsourcing can lead to increased innovation and improved access to talent, which can contribute to long-term growth and competitiveness. (2020 Global Outsourcing Survey | Deloitte US, n.d)

Furthermore, outsourcing can help businesses to improve their operational efficiency by allowing them to refocus resources on core functions. In turn, this can help businesses to become more agile and responsive to market changes.

Challenges and risks of outsourcing

Despite the numerous potential advantages of outsourcing, there are also several challenges and risks that businesses should consider before pursuing this strategy.

One of the risks of outsourcing is a loss of control over certain functions. (Ejechi & Oshodin, 2019) This is because outsourcing requires businesses to transfer some of their operations to a third-party provider, which may limit the level of control that the business can exert over these functions. Additionally, outsourcing may create cultural and communication barriers that can hinder effective collaboration between the business and the outsourcing provider. Moreover, outsourcing may expose businesses to regulatory and legal risks regarding privacy and data protection. Therefore, it is important for businesses to carefully evaluate potential outsourcing providers and establish clear contractual agreements that outline key performance metrics and quality standards. Data and information security is a critical challenge associated with outsourcing.

Successful outsourcing strategies

Successful outsourcing strategies require businesses to carefully evaluate potential providers and establish clear communication channels that promote effective collaboration.

Determining outsourcing goals and scope is a crucial first step in developing a successful outsourcing strategy. This involves identifying which functions to outsource, the desired outcomes of outsourcing, and how these outcomes will be measured.

Choosing the right service provider is also a critical factor in successful outsourcing. Businesses should evaluate a range of factors when selecting an outsourcing provider, including their experience, reputation, and ability to deliver high-quality services.

Additionally, businesses should consider the outsourcing provider’s cultural fit and shared values to ensure that both parties are aligned in terms of goals and expectations.

Managing effective relationships and communication is crucial to successful outsourcing. This involves establishing regular communication channels, such as weekly or monthly updates and progress reports. (6 Steps for Building a Successful Outsourcing Strategy | BXGI, n.d)

Performance evaluation and periodic adjustment of the outsourcing strategy are also important. Clear performance metrics and quality standards should be established to ensure that the outsourcing provider is meeting expectations, and any issues or concerns should be addressed promptly. Regular performance assessments can help businesses maintain the value and effectiveness of their outsourcing partnerships over time. (Pellicelli, 2018)

Case study: Example of a company successfully using outsourcing

IBM

IBM is a global technology company that specializes in software, hardware, and services. With over 350,000 employees worldwide and a presence in over 170 countries, IBM is one of the largest and most established firms in the technology industry.

As part of its global operations, IBM has successfully used outsourcing to manage certain business functions. For example, IBM has outsourced its IT infrastructure management to companies such as Wipro and HCL Technologies. By doing so, IBM has been able to reduce costs and increase the efficiency and management of its IT infrastructure while also focusing on its core business operations. (Wipro and IBM Global Partnership – IBM Alliance – Partner Ecosystem, n.d)

Outsourcing process carried out:
To successfully implement its outsourcing strategy, IBM followed several key steps. First, IBM identified the specific business functions that would benefit from outsourcing. This involved a detailed analysis of the costs, benefits, and risks associated with each function.IBM then evaluated a range of potential outsourcing providers based on their experience, reputation, ability to deliver high-quality services and cultural fit. IBM selected Wipro and HCL Technologies as outsourcing providers for its IT infrastructure management function based on their ability to meet IBM’s high standards for quality of services, technical expertise, and their cost-effectiveness.

Archived result:
The outsourcing of IT infrastructure management to Wipro and HCL Technologies enabled IBM to achieve significant cost savings while also improving the efficiency and effectiveness of its operations. Additionally, outsourcing allowed IBM to focus on its core business operations and leverage the expertise of specialized providers in IT infrastructure management. This successful implementation of outsourcing demonstrates the potential benefits that outsourcing can bring to businesses, including cost savings, increased efficiency and focus on core operations.

Syngenta

Syngenta, a global agribusiness company, is another example of a business that has successfully used outsourcing to drive growth and innovation. Syngenta had initially relied on in-house research and development (R&D) to drive innovation in the agribusiness sector. However, as the industry became more competitive and technologically advanced, Syngenta realized it needed to expand its R&D capabilities.(Research and development | Syngenta, n.d)

Outsourcing process carried out:
To achieve this, Syngenta partnered with Accenture to establish a global R&D network that would centralize its research efforts and optimize its innovation processes. Accenture was responsible for managing the network, which entailed integrating Syngenta’s existing R&D infrastructure with that of its external partners to create

Archived result:
a collaborative and efficient platform for innovation. As a result of this outsourcing partnership, Syngenta was able to streamline its R&D processes and accelerate its development timelines. This outsourcing partnership also enabled Syngenta to leverage Accenture’s expertise in research and development, as well as its knowledge of emerging technologies and market trends, to create a more innovative and competitive R&D infrastructure.

Trends and future of outsourcing

The influence of technology and digitalization has been a major trend in outsourcing and is likely to continue shaping the future of outsourcing. The increasing prevalence and advancement of digital technologies have facilitated remote work and collaboration, making outsourcing more accessible and efficient. (How Technology Has Changed Outsourcing – Impact Hub, n.d)

More and more companies are realizing the importance of focusing on their core business functions and outsourcing peripheral activities to specialized providers. This shift in business models and practices has not only led to cost savings but also allowed businesses to access specialized expertise and technology that they may not have otherwise been able to afford or develop in-house. This trend is expected to continue in the future, as businesses seek to stay competitive by leveraging the expertise and technology of specialized outsourcing providers (Ji, 2016). Additionally, environmental and social considerations are expected to become increasingly important in outsourcing decisions. As the world becomes more conscious of sustainability and social responsibility, businesses are expected to prioritize selecting outsourcing partners that align with their values and contribute positively to society through their outsourcing partnerships. (Trushchenko et al., 2019)

Conclusion

Outsourcing should be viewed as a strategic decision that requires careful evaluation and planning. Before embarking on outsourcing, businesses should assess their needs and capabilities, evaluate potential providers based on factors such as cost, expertise, and reputation, establish clear communication channels and define expectations and deliverables, as well as establish metrics for evaluating the success of the outsourcing partnership. By following these steps, businesses can make informed outsourcing decisions that align with their strategic goals and contribute to their overall success.

Successful outsourcing strategies require careful evaluation of potential providers, clear communication, and regular performance assessments. Case studies of companies such as IBM and Syngenta demonstrate the potential benefits of outsourcing in improving operational efficiency and driving innovation. The future of outsourcing is expected to continue to be shaped by technology and a focus on core business functions, as well as increasing considerations for environmental and social responsibility. Overall, outsourcing can be a valuable strategy for businesses if implemented effectively and with careful consideration of its potential benefits and risks.

References

  1. Berg, P., Olstad, B. H., Berg, P. R., & Kjendlie, P.. (2020, December 22). Outsourcing Swimming Education—Experiences and Challenges. International Journal of Environmental Research and Public Health, 18(1), 6. https://doi.org/10.3390/ijerph18010006
  2. Iqbal, Z., & Dad, A. M.. (2013, July 1). Outsourcing: A Review of Trends, Winners & Losers and Future Directions. ResearchGate, 4(10). https://www.researchgate.net/publication/292623462_Outsourcing_A_Review_of_Trends_Winners_Losers_and_Future_Directions
  3. 2020 Global Outsourcing Survey | Deloitte US. (n.d). https://www.deloitte.com/an/en/services/consulting/perspectives/gx-global-outsourcing-survey.html
  4. Ejechi, J. O., & Oshodin, E. A.. (2019, June 27). Business Process Outsourcing Strategy on Competitive Advantage and Organizational Performance. International Journal of Academic Research in Business and Social Sciences, 9(6). https://doi.org/10.6007/ijarbss/v9-i6/5987
  5. 6 Steps for Building a Successful Outsourcing Strategy | BXGI. (n.d). https://bxgi.com/insights/6-steps-for-building-a-successful-outsourcing-strategy
  6. Pellicelli, M.. (2018, May 22). Gaining Flexibility and Innovation through Offshore Outsourcing. Sustainability, 10(5), 1672. https://doi.org/10.3390/su10051672
  7. Wipro and IBM Global Partnership – IBM Alliance – Partner Ecosystem. (n.d). https://www.wipro.com/partner-ecosystem/ibm-alliance/
  8. Research and development | Syngenta. (n.d). https://www.syngenta.com/en/innovation-agriculture/research-and-development
  9. How Technology Has Changed Outsourcing – Impact Hub. (n.d). http://impacthub.org/resources/blog/how-technology-has-changed-outsourcing-3/
  10. Ji, S.. (2016, January 1). Human Resource Outsourcing and Risk Management for SMEs. https://doi.org/10.2991/mcei-16.2016.23
  11. Trushchenko, I. V., Maloletko, A. N., & Kaurova, O. V.. (2019, January 1). Outsourcing in the organization of global business services. https://doi.org/10.2991/icsdcbr-19.2019.66