Partnership Rather Than Procurement is the New Path to Effective Outsourcing, According to PricewaterhouseCoopers' New 2007 Global Outsourcing Survey


LONDON, May 21, 2007 (PRIME NEWSWIRE) -- While outsourcing remains a critical element of the corporate strategic mix, success in today's complex outsourcing marketplace is contingent on new dynamics, specifically the customer and service provider relationship, according to a PricewaterhouseCoopers' Global Outsourcing study, Outsourcing Comes of Age: The Rise of Collaborative Partnering. The study explores a key issue raised by CEOs in PricewaterhouseCoopers' Annual CEO Survey at Davos and reflects insights garnered from both outsourcing customers and providers representing 19 countries across several continents.

A large majority of customers (87%) say today's outsourcing delivers the benefits projected in the original business plan. In fact, outsourcing is perceived as such an essential business practice that 91% of customers, whether completely happy or not, said they will outsource again.

Customers in the U.K. and the United States, classified as large mature outsourcing markets, have identified the following operations as hot spots for outsourcing growth: procurement services (53% with expansion plans), customer call centers (45% with expansion plans) and, finance/accounting (44% with expansion plans).

In addition to the continued growth and significance of outsourcing, one clear trend from survey data is the frequent disconnect between the needs and expectations of customers and service providers. A quarter of customers think "many suppliers/providers" work better than "few suppliers/providers," vs. only 10% of service providers. While 52% of service providers recommend offshore outsourcing, only 20% of customers believe this works best in real-life outsourcing.

"Outsourcing is still very much the game, but the rules have changed," said Pat McArdle, Global Outsourcing Partner at PwC. "The lightning pace of growth in outsourcing is only matched by the transformation of the market as traditional models are gradually being replaced by multisourcing, joint ventures, and "best of breed" arrangements. Managing this extended network of relationships requires more transparency, better communication, greater trust, and genuine reciprocity. In a nutshell, success in this environment will heavily hinge on shifting the customer-service provider relationship from adversarial to collaborative; from one based on procurement to one grounded in partnership."

In fact, survey results show that there is a tangible payoff to collaboration. Companies identified as "expert outsourcers" (those who met their business plan goals completely) measured their service providers as better collaborators than "learners" (companies for whom outsourcing only partly met business goals) with 81% stating that they have honest and transparent dealings with providers (versus 62% for the learners).

Furthermore, customers who were defined as "high collaborators" (based on rating their providers the highest overall on the key indicators of collaboration such as "business dealings being honest and transparent") experienced the most mutual engagement with their outsourcing providers.

Other characteristics of "high collaborators" include:


 -- Greater likelihood of being open-minded, enabling them to better
    manage around barriers to outsourcing
 -- Tendency to support the use of multisourcing (many
    suppliers/providers) over limited sourcing (few 
    suppliers/providers)
    far more than other respondents
 -- Tendency to support shared risk and reward over traditional
    commercial terms

"Outsourcing is growing fast and delivering results," continues McArdle. "High collaboration between customers and providers yields increased confidence in overcoming the challenges of outsourcing, broader business model innovation and expanded outsourcing investment in key areas of the business."

In other findings, while information technology still accounts for a predominant part of outsourced activity, the scope is extending rapidly into inherently strategic areas such as production/delivery of core products/services and innovation/ R&D, both of which are expected to experience growth during the next five years. The expansion into innovation and R&D is particularly visible in the media/telecommunications/IT sector, likely due to competitive pressures to mine every potential source of new ideas and revenue streams.

Furthermore, 66% of customers say that social and environmental issues will have a significant impact on their offshoring decisions as providers remain skeptical, with 52% claiming that they do not feel that these issues will be significant to their clients. However, both customers and providers agree that labour and employment standards at potential offshore locations are a key concern.

Note to Editor:


 1.   PricewaterhouseCoopers provides industry-focused assurance, tax
      and advisory services to build public trust and enhance value for
      its clients and their stakeholders. More than 140,000 people in
      149 countries across our network share their thinking, experience
      and solutions to develop fresh perspectives and practical advice.
      "PricewaterhouseCoopers" refers to the network of member firms
      of PricewaterhouseCoopers International Limited, each of which
      is a separate and independent legal entity.

 2.   Survey Methodology

      This report provides key findings of the PricewaterhouseCoopers
      2007 Global Outsourcing Survey. It directly compares the
      experiences and opinions of customers and service providers of
      outsourcing, on a global scale -- 292 respondents in total.

      Customer survey

      PricewaterhouseCoopers conducted telephone interviews with 226
      senior operating executives of private sector corporations that
      are 'customers' of outsourcing services in 19 countries during
      March and April 2007. 51% of respondents are in customer firms
      with revenues greater than $1 billion US, including 16% with
      revenues greater than $10 billion. We have classified the
      customer responses into three groups, based on our analysis of
      the maturity of the outsourcing market in various countries and
      similarities of responses to the survey:
       * Large mature market: United Kingdom and United States (78
         respondents, of which 63% have revenues greater than $1
         billion).
       * Medium mature market: Australia, Canada, New Zealand (31
         respondents, of which 84% have revenues greater than $1
         billion)
       * Rising market: Bahrain, Belgium, Brazil, China, India, Italy,
         Japan, Mexico, Russia, South Africa, Sweden (117 respondents,
         of which 35% have revenues greater than $1 billion). Each of
         the listed rising market countries provided at least 5, and as
         many as 21 responses. Three other countries provided a total
         of four responses.

      Service provider survey

      Of the 66 service providers we surveyed, 43 are in four
      countries: U.S. (20), China (9), India (9), and U.K. (5). The
      remaining 23 service provider respondents are in 15 different
      countries on every continent.


            

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