2011 Outsourcing Review - So Far..

There is no doubt that 2011 has been an eventful year for outsourcing so far.

We’ve seen economic and budgetary pressures creating a buyer’s market, while the ongoing recession and public sector cuts have meant that outsourcing suppliers are expected to provide even more for less and many mega contracts have been replaced by more transparent, flexible and short-term collaborations.

Cost will undoubtedly remain a key driver for outsourcing, but 2011 has brought a shift in attitude – now it’s more about cost efficiencies and change for the long term, rather than a short-term cutting exercise. Clients want to partner with outsourcing companies to transform their businesses for the better – to deliver greater efficiency, improve flexibility, increase quality of service to their customers, and help them stay ahead of the competition through innovative solutions.

According to the 2011 Q2 TPI Index, growth in ITO and BPO contracting activity continued in the first half of the year while Americas’ resurgence continued to seem unlikely in 2H11.

Roger Newman, Senior Vice President, Mahindra Satyam, commented: “So far this year we have had cause for a cautious optimism towards our business. There is a fair amount of activity in the marketplace and some large deals have taken place, but the majority of deals we are bidding on are projects or transformational programmes rather than full outsourcing deals. This activity is evident across most of the major industry verticals. Uncertainty about the economic situation often means that companies are unwilling to expand their own headcount and this pushes businesses to outsource companies such as ourselves.

“Looking inwardly, we believe that the growth levers for IT and ITeS companies today are predominantly hovering around growth, differentiation and capabilities. This is a continuous cycle that determines strength in the market and the mind, and our strategy is aligned to these three aspects. Growth means better account mining, getting new logos and striking strategic alliances and investments into niche players.”

The outsourcing industry, and IT as a whole, has been strongly focussed on the cloud and the potential for flexible, cost effective computing. It was the most important topic at the start of 2011 and half a year has done nothing to change that. Providers and end users can no longer ignore its possibilities – understanding the cloud and how it can revolutionise the industry is both exciting and challenging.

David Ebsworth, CTO of Oncore IT, said: “With discussion on the cloud so prevalent, it’s no surprise that we’ve seen more multi-tenanted solutions coming to the market as the year’s gone on. Virtualisation and consolidation continues to drive the desire to relocate not just secondary and disaster recovery systems, but increasingly critical IT to the cloud. Overcoming the associated technology issues needs careful evaluation of any existing infrastructure and realistic expectations of what an end user requires.

“Finally is data. There’s no doubt that the volume being outsourced will increase as businesses move to protect their mission critical resources. All the while, companies will expect a simultaneous cost reduction. Attempts for an effective balance will continue as payment models are experimented with.”

A collaborative and flexible approach has become far more relevant in the 2011 economic landscape where growth is slow and the need for more creative approaches to driving efficiencies and improving service quality has become the key.

Rainer Majcen, Managing Director, Public Sector, arvato UK & Ireland said: “New thinking and innovative solutions will be vital to the future of public sector organisations. As a result, alternative service delivery models, such as co-operation with other local or regional public sector bodies, or service delivery vehicles like employee ownership or social enterprises are currently being considered.

“Ultimately, addressing the individual needs of a locality and focusing on creating a flexible and adaptable partnership will ensure that relationships prosper; adding value to all organisations in the community and delivering much needed cost savings for the public sector, whilst not compromising on the breadth and quality of the service offering. arvato’s relationship with Chesterfield Borough Council and the potential £4 million savings is a good example of the strength of this type of partnership.”

Consumers are also becoming more demanding in their search for immediate answers to complex enquiries. As a result, they are looking to an increasing number of channels for solutions. The key challenge to contact centres is to be able to effectively manage data from multiple channels. This requires solutions that have both the intelligence and flexibility to adapt to changing market and consumer needs.

Mark Brown, Managing Director, Contact Centres & Loyalty, arvato UK, commented: “Social media has empowered all consumers to become a broadcaster or journalist, so customer service becomes even more important and speed is of the essence; a complaint sent via Twitter that is left with no response management overnight could be spread worldwide very quickly.

“It’s important that all communications channels – whether it’s voice, email, hard copy or social media – are consolidated at the point of receipt to prevent duplication and ensure consistently high standards of handling and data capture.”

As the year draws to a close, the outsourcing industry will continue to prioritise standardisation and professionalism. Customers will increasingly ask their outsourcing providers to provide ‘more for less’ along with an increase in public sector shared services and providers offering flexible, innovative and cost effective contracts.