Confidence in outsourcing grows post-recession
More than half of outsourcing end-users are more confident in the use of outsourcing to support their business objectives than they were in 2009.
According to the National Outsourcing Association’s (NOA) quarterly Outsourcing Confidence Index report, which surveyed UK outsourcing end-users, 52 per cent of respondents are reviewing existing outsourcing contracts and considering new sourcing opportunities as a result of increasing confidence across the board.
The report also assessed confidence across various verticals and found that the financial services sector is most positive (71 per cent) about the use of outsourcing in 2010 and beyond. The services sector also indicates high confidence, with 61 per cent being more positive than last year, while the retail sector is marginally less confident at 55 per cent.
Owing to the increased industry confidence, 60 per cent of users said they intended to outsource services not previously outsourced this year. Likewise 56 per cent of those already outsourcing planned to increase the scope of existing contracts.
However, together with the industry’s renewed confidence, the recession has also wrought certain changes in how end-users are using outsourcing. Focus on cost reduction has risen sharply with end-users now seeking approximately 15 per cent savings from outsourcing compared with 10 per cent before the recession. Furthermore, organisations are seeking a more rapid cost-impact from outsourcing, looking for net cost reductions with 16 months as opposed to 13.5 months in 2009.
The continued focus on cost reduction has also led to a greater interest in offshoring, as users search for lower cost delivery around the globe. All respondents said they planned to increase offshoring by the end of 2010. Indicating the increasing maturity of the outsourcing, 88 per cent of respondents said they placed a high importance on multi-shoring – the use of multiple sourcing locations – in the next 12 months.
Although the overall outlook looks positive for the industry, users did indicate a distinct lack of confidence in the outsourcing suppliers. 78 per cent of respondents believe that supplier outsourcing capability has not improved over the past 12 months. The areas where users would like to see improvements include lower costs and more transparent pricing, and greater service flexibility, together with improved ability to access specialist personnel.
Martyn Hart, Chairman of the NOA, commented: “Outsourcing has traditionally been seen as a cost-saving mechanism for business, so during the torrid 2009, it is not surprising that interest in outsourcing is continuing to grow. However, continued focus on cost above everything else means that many are pushing through higher-volume low-cost contracts, over shorter time frames. This short-termism can be dangerous and these kinds of contracts frequently fail.”
“That said, it looks like suppliers still have some work to do to ensure they’re fully catering for what users want in 2010. This is likely to be an ongoing issue as users continue to seek new cost savings from less mature providers and locations around the world.”
