{"id":1398,"date":"2012-03-05T10:29:00","date_gmt":"2012-03-05T10:29:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/industries_outsource_sharedsvs_022712\/"},"modified":"2012-03-05T10:29:00","modified_gmt":"2012-03-05T10:29:00","slug":"industries_outsource_sharedsvs_022712","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/industries_outsource_sharedsvs_022712\/","title":{"rendered":"Which industries are more inclined to outsourcing versus shared services?"},"content":{"rendered":"

Our recent State of Outsourcing study<\/a>, conducted with the Outsourcing Unit at the London School of Economics, has revealed that nine out of every ten enterprises will be increasing or maintaining their reliance on either, or both, outsourcing and shared services over the next three years. \u00a0The key is to identify, at the\u00a0industry level<\/em>, what factors are influencing these increasingly aggressive approaches to global sourcing strategy.<\/p>\n

\"\"<\/p>\n

The study has uncovered many home-truths about why some organizations are more motivated to externalize their support operations to third-parties, while others prefer to focus on their own shared services investments.\u00a0We can also evaluate organizations within specific industries that are seeking to assign equal significance to\u00a0both<\/em>\u00a0outsourcing and shared services as they pursue a holistic governance framework across both models.<\/p>\n

So we’ve taken a closer look at how 250 large organizations, with annual revenues greater that $1 Billion, are intending to make\u00a0significant\u00a0planned investments in either, or both outsourcing and shared services models over the next three years:\u00a0<\/span><\/p>\n

\"\"<\/p>\n

It’s plain to see that it’s organizations within those industry verticals experiencing fundamental shifts<\/em> to their economics, which are more prepared than ever to admit they need to look outside<\/em> of their current organizational boundaries to keep their business operations competitive. Simply-put, secular changes to industry environments are crystallizing options for businesses and driving more radical and actionable behaviors from executives under pressure to deliver continual productivity improvements. The radical impact outsourcing can potentially have on business performance is clearly becoming more attractive to those businesses in the throes of tackling fundamental challenges and opportunities to their business environments.<\/p>\n

Buyers are getting savvier at focusing their outsourcing plans to improve their competitive advantage<\/span><\/p>\n

Increasingly, we are seeing a realization that retaining some processes internally\u00a0isn’t\u00a0\u2013 in any shape of form \u2013 bringing organizations a competitive edge, and these sourcing decisions are no longer only about cost \u2013 they represent a fundamental change in the way business leaders now view outsourcing as an integral function of their operations.<\/p>\n

For example, many of today\u2019s leading banks do not lead their markets because they process mortgage applications better than their competitors.\u00a0 Their management teams typically prefer to find a services partner to process them at lower cost, using industry-standard process flows and technology, while it focuses its internal competencies on business functions that can help the bank gain marketshare, such as smarter customer targeting, or upselling new product through customer support channels etc.<\/p>\n

Similarly, most of today\u2019s leading insurance providers have already embarked on long-term engagements to have their claims processes managed, processed and adjudicated by third-parties, allowing their internal talent to focus on market-leading initiatives, such as competitive advertising strategy and new service development that can help them gain an edge over the competition.\u00a0 Customers do not care about how their claims are processed \u2013 they care about how much their policies cost, the additional benefits they can receive as\u00a0 customer and the brand and reputation of the insurance carrier.<\/p>\n

In addition, does a retailer really need to maintain its entire application portfolio inhouse, when it can devote its internal talent and IT resources to improving its customers\u2019 online shopping experience, where it can actually grow its business?<\/p>\n

Today\u2019s buyers are getting a lot smarter at figuring out how they can improve their organizations by using the resources and knowledge available through third-party relationships.<\/p>\n

Industries experiencing dramatic secular shifts are developing long-term aggressive outsourcing strategies<\/span><\/p>\n

The five most bullish industries planning significant increases with outsourcing, are not only basing their planning on achieving ongoing cost-reduction outcomes (read here<\/a> for more on this topic), but also because the fundamentals of their industries have dramatically shifted in the recent past, for example:<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Entertainment, media and publishing:<\/strong> The crash of newspapers and network news; The Web 2.0 impact; Radical new distribution and business models.<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Software and Hi-Tech:<\/strong> Rapid commoditization of packaged software models; Impact of Cloud computing on licensing and pricing dynamics; Dominance of India, China and other low-cost nations to drive out the cost of development;\u00a0 Willingness to \u201cEat their own dog-food\u201d as providers of outsourced services themselves.<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Energy & Chemicals:<\/strong> High price volatility for oil products; high capital costs of oil exploration projects;\u00a0 Shortages of talent;\u00a0 Aging infrastructure and constantly-changing compliance requirements.<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Banks:<\/strong> Massive de-leveraging; Re-regulation; Unprecedented debt\/credit pressures.<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Insurance:<\/strong> New compliance measures (Solvency II, ObamaCare) causing unprecedented administrative cost and workload; Shortage of risk analysts and actuaries to take on the higher level work.<\/p>\n

There are just a few examples of major industries, being shaken to their very foundations, where we can discuss secular shifts driving unprecedented demands on organizations to remain competitive. HfS believes it is no coincidence that it is these industries that are today the most aggressive with embracing third-parties to redefine their global operations?\u00a0 Secular changes drive bolder, more radical behaviors, and it is already clear that a more aggressive approach to outsourcing is high on these organizations\u2019 agendas.<\/p>\n

Industries that have already experienced much of their secular changes in the past are more focused on investing in shared services frameworks<\/span><\/p>\n

These businesses are typically reactive to market conditions and often radical long-termism doesn\u2019t fit as well with their mentality, especially when faced with uncertain times ahead. In addition, many of them have already shaved their operating costs to the bone, hence digging out new productivity benefits via outsourcing is often challenging \u2013 and mistakes can prove fatal in a low-margin business.<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Industries such as retail<\/strong> and manufacturing<\/strong>, one can argue, have already been through their secular shifts over the last three decades or more.\u00a0 While they have had to experience much fundamental change, for example mass globalization of markets and volatile changes to consumer spending behaviors, the very essence of these industries is still the same \u2013 their organizations are focused on inventory management and supply chain optimization, maintaining operating margins and accurately predicting demand. \u00a0To them, outsourcing has always been an option, and has been readily explored over the years to find more pennies to save. So while economic conditions may have been vicious, focus on short-term cash-flow has clearly been the priority for many in these sectors, and radical overhaul of operational infrastructure clearly not an attractive option.<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Utilities<\/strong> are also proving to be more conservative with outsourcing, with a strong shared services focus.\u00a0 While many of the large utilities organizations have been among the earlier adopters of hybrid outsourcing and shared services models, many of them have not felt such secular change as many of those industries that were more dramatically impacted by the 2008 crash and many of the fundamental shift mentioned above.<\/p>\n

\u00bb\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 While there are many active outsourcing engagements \u2013 both existing and new – in telecom <\/strong>and wireless<\/strong>, HfS sees more these engagements as relative small in scope as these firms opt for more incremental, conservative ventures into outsourcing.\u00a0 For example, several major telecom firms are evaluating smaller BPO initiatives in areas such as sourcing and transactional accounting, and still prefer to engage in several smaller multi-vendor engagements in the ITO space.<\/p>\n

Hence, it\u2019s no surprise that these organizations are more conservative with their long-term operational planning.\u00a0 Moreover, many have proven to be heavy outsourcing adopters in the past, and we expect these sectors to remain focused on maintaining their outsourcing initiatives, but with a large proportion opting for a more reserved approach, with increased focus on improving, and in some cases expanding, their internal shared services competencies.<\/p>\n

The Public Sector: Facing up to unprecedented challenges<\/span><\/p>\n

One industry which is going through more secular change than any today is the Public Sector<\/strong>.\u00a0 Quite simply, national and local government bodies are under unprecedented pressures to drive austerity measures and make long-term plans to drive new productivity programs.\u00a0 This explains why 55% of public sector bodies actually foresee some moderate increase in outsourcing activity over the long-haul.\u00a0 Huge political bodies, such as the US Navy, NASA, the UK Inland Revenue and National Health Service \u2013 and even the FBI \u2013 all outsource elements of their operational support functions to varying degrees. With increased onshore delivery resources becoming available from several providers, this could well turn out to be a surprisingly large growth sector for outsourcing.<\/p>\n

The Bottom-line: New fundamentals are creating new rules to manage one holistic and comprehensive outsourcing and shared services strategy<\/span><\/p>\n

Outsourcing is entering a new era \u2013 one where organizations can no longer afford to ignore its benefits. As these radical and secular changes to many of our core industries take hold, business leaders simply cannot overlook the competitive advantage outsourcing offers: enabling them to focus on developing competitive advantage.\u00a0 These secular shifts are threatening the survival of many businesses, but at the same time are opening up major opportunities to build smarter, more globalized and leaner organizations. Business leaders can no longer afford to cling to many of the methods of yesteryear to steer their organizations, and this data points to a more bold, radical approach to embrace the benefits of global sourcing.<\/p>\n

However, most smart organizations are no longer evaluating shared services and outsourcing strategies in silos; while these initiatives are singularly successful at providing benefits to that individual function, our research has shown that these initiatives have failed, in many situations, to improve comprehensively the broader corporate strategic objectives of these organizations.<\/p>\n","protected":false},"excerpt":{"rendered":"

Our recent State of Outsourcing study, conducted with the Outsourcing Unit at the London School of Economics, has revealed that…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,81,832,830,842,837],"tags":[303],"ppma_author":[19],"yoast_head":"\nWhich industries are more inclined to outsourcing versus shared services? - Horses for Sources | No Boundaries<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.horsesforsources.com\/industries_outsource_sharedsvs_022712\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which industries are more inclined to outsourcing versus shared services? - Horses for Sources | No Boundaries\" \/>\n<meta property=\"og:description\" content=\"Our recent State of Outsourcing study, conducted with the Outsourcing Unit at the London School of Economics, has revealed that...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.horsesforsources.com\/industries_outsource_sharedsvs_022712\/\" \/>\n<meta property=\"og:site_name\" content=\"Horses for Sources | No Boundaries\" \/>\n<meta property=\"article:published_time\" content=\"2012-03-05T10:29:00+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2012\/02\/Industrial-rev.png\" \/>\n<meta name=\"author\" content=\"Phil Fersht\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@pfersht\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Phil Fersht\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"8 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.horsesforsources.com\/industries_outsource_sharedsvs_022712\/\",\"url\":\"https:\/\/www.horsesforsources.com\/industries_outsource_sharedsvs_022712\/\",\"name\":\"Which industries are more inclined to outsourcing versus shared services? 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