Outsourcing Strategy Survey 2009 2010

Sourcing Transformation

OUTSOURCING STRATEGY SURVEY 2009-2010
A Capgemini Consulting survey on Shared Services and
Outsourcing

October, 2009

Introduction ........................................................................................... 3

Executive summary .............................................................................. 4

Background ........................................................................................... 6

Processes currently outsourced and future plans .......................... 10

Why organisations outsource and which risks they see ................ 16

Business Case ..................................................................................... 21

Select and prepare for the partnership ............................................. 24

Change management .......................................................................... 30

Demand organisation ......................................................................... 35

List of participants .............................................................................. 38

Capgemini Consulting is the strategy and
transformation consulting brand of Capgemini Group Outsourcing Strategy Survey 2009-2010 2

Introduction
As a consequence of the As a full-service consulting
changing business organisation, Capgemini
environment, including the key Consulting wants to understand
impact of the credit crunch, we what is happening in the market
are seeing organisations re- to be able to provide the best
evaluate their sourcing possible advice and support to
strategies. In some cases, this our clients. Many surveys cover
is because of a short term need the specifics of the outsourcing
to save additional costs, in or shared service operation, not
others, because a more many describe how the
favourable deal structure can sourcing strategy was
now be negotiated. developed and what made it
successful.
We are also seeing
organisations postponing the That is why we are pleased to
sourcing strategy decision and share with you the results of our
execution. Sourcing of a survey on sourcing strategy in
business or IT process can help different industries. This report
operations run more efficiently covers a wide spectrum of
and can result in cost savings. perspectives related to the
Despite these benefits, many sourcing strategy approach and
initiatives have been put on we believe it benefits anyone
hold because of economic and every organisation, from
uncertainty. sourcing pioneer to sourcing
expert.
We know that a changing
environment delivers complex We would like to thank all the
challenges in defining the right executives who contributed to
sourcing approach. That is the our survey and provided their
main reason why we valuable insights and time. We
investigated the incentives for trust that you will find this report
sourcing, with a specific focus interesting and useful as you
on the sourcing strategy continue on your journey,
process. defining the right sourcing
Authors: strategy for your organisation.
In writing this report, we
Joost Aarts combined the outcome of Also I would like to thank
Robin Adriaans interviews with our latest Marjorie Powner and Satish
Fleur Baarspul insights in trends and issues in Paul from our BPO practice and
Erik van Daalen different industries. As this Professor Dr. Ir. Andrzej
Marjolein Dijkshoorn survey was executed during the Hajdasinski from Nyenrode
Oedger Meijborg credit crunch, we found some Business University for their
Stefan Westdijk specific effects on sourcing valuable contributions.
strategies. We did not,
however, directly investigate Stefan Westdijk
these effects. Sourcing Strategy Leader
Netherlands


Executive summary
This report highlights the The outcome of our survey
importance of sourcing strategy suggests the following
in the evolution of an recommendations, which
organisation‟s development. particularly apply to
Capgemini Consulting captured organisations within our target
the views and experiences of industries (Financial Services,
almost 40 executives from a Energy & Utilities, and
number of large national and Manufacturing):
multi-national companies, with a
view on future decision making o Organisations will benefit
and successful development from considering a
and implementation of sourcing combination of sourcing
strategies for our clients. modes to realise their
sourcing strategy. This can
Our findings below explore the give insight to the benefits
whole cycle of the sourcing and concerns of each
strategy and show that success sourcing mode and may
is particularly dependent on result in ideas to support risk
choosing the right sourcing mitigation.
mode. Capgemini‟s Global
Sourcing of Services (GSS) o 54% of the participants will
©
cube has been used to renew the contract with the
distinguish the different existing supplier. The main
sourcing modes, using three reasons for organisations to
dimensions (location, ownership retain their current supplier
and management style). are that the costs related to
changing supplier could be
More information about the prohibitive and the loss of
©
GSS cube can be found in our knowledge or experience
could increase risk or impact
Point of View on Sourcing
quality.
Strategy document.

©
Outline on the Global Sourcing of Services (GSS) cube

Offshore

Location

Onshore Light
Management
Tight Style
In-house Outsourced
Ownership


o Organisations should update and innovation are important
their business case drivers. The full added value
regularly, this will ensure of innovation by outsourcing
decision-making in future is not yet discovered, but
phases is based on sound this is just a matter of time.
information and also that the
benefits of the original o Organisations experience
decision are realised. difficulties in defining the
relationship with the internal
o Organisations will benefit or external supplier. This is
from working in real explained by the fact that
partnerships with their sourcing is all about the
suppliers, introducing, for involvement of people,
example, bonuses for high entering a partnership and
performance, rather than the transformation of
penalties for low
processes. In our opinion, it
performance, in their
requires specific skills to
contractual terms. Working
formalise these aspects in a
in partnership also ensures
alignment, coordination and contract.
control of both supplier and o Organisations should also
business needs. involve vendors from the
o Organisations should use early phases to provide
benchmarking tools to support with defining
assess the performance of requirements, delivering
their suppliers and use the accurate market information
outcome of that analysis to and managing expectations.
decide, for example, whether
o Organisations should focus
to renew their existing
frequently (at least once
contracts or find a new
every quarter) on the
supplier.
evaluation of service quality.
o Change management and
implementation are the most o Organisations should align
critical elements of the demand and supply within
programme during transition one function to ensure
or migration. The control of both aspects of the
involvement of senior service.
management and
stakeholders of the business There was no significant
should be high, especially in relationship between specific
the early phases. Delaying industries and sourcing
employee involvement can strategies. Our analysis of the
cause problems later in the results does not show a notable
process. preference of any of the
o Due to pressure to industries for IT sourcing or
differentiate from business process sourcing. The
competitors, organisations sourcing maturity level depends
are entering into more on the organisation itself and is
strategic partnerships, for not primarily related to an
which knowledge transfer industry.


Background
About Sourcing Selecting the right sourcing
mode means finding the right
There are many definitions of
combination of ownership
sourcing. For the purpose of
(owned or not owned), location
this survey, sourcing can be
(onshore or offshore) and
defined as delegating business
management style / governance
functions to a separate
model (tight touch or light
business unit or third party. A
touch). These three elements
sourcing strategy is the
have been captured in a cube
definition of what an
of sourcing options or modes.
organisation wants to do with
This cube is called the Global
the tasks, functions or
Sourcing of Services (GSS)
processes that are not ©
cube .
differentiating that organisation
from its competitors.

©
Outline on the Global Sourcing of Services (GSS) cube

Offshore

Location

Onshore Light
Management
Tight Style
In-house Outsourced
Ownership
©
The GSS cube distinguishes eight different sourcing modes divided
over three dimensions: location, ownership and management style.
Location describes where the function is executed (onshore or
offshore)
Ownership demonstrates who executes the function (in-house, e.g.
shared service centre, or outsourced)
Management style depicts the level of management attention that is
required for the process (light or tight management)


Based on the GSS cube‟s three Whilst we focussed on all
dimensions, sourcing can take dimensions of the GSS cube in
different forms. The sourcing the survey, the dimension
strategy with the least impact management style was not
from the perspective of explicitly questioned. Aspects
ownership, location change and of management style are,
intensity of management is a however, covered in the
Shared Service Centre (SSC). chapters about partnerships,
risk and change management
Today companies either choose below.
to optimise existing SSC or set
up new SSCs in competitive We interviewed chief
markets. Evaluating the information officers, chief
geographical scope and operation officers, chief
location strategy can be financial officers, SSC
lucrative, whether this is managers, sourcing strategy
outsourcing or cross-border managers and divisional
shared services, as potential managers of 38 large national
sourcing strategies. This could entities or multinationals, mainly
take the organisation in the with a head office located in the
direction of the highest impact Netherlands. The interviews
sourcing strategy from an were held in Q4 of 2008 and Q1
ownership, location and of 2009.
management perspective:
outsourcing to an offshored As mentioned above, we were
third party where management very interested in the
attention is not critical. More differences in approach,
information about the GSS sourced processes and
©
cube can be found in our Point selected sourcing modes
of View on Sourcing Strategy between industries. Figure 1
document. shows the distribution of the
industries participating in the
Why this survey survey. Three organisations
participated who could not be
Most of the surveys conducted
Energy & classified as Energy & Utilities,
Utilities by firms like Gartner, Forrester
Financial Services or
21% and others focus on IT sourcing
Manufacturing.
and in general do not describe
the differences between
Manufacturing
Financial 55% industries. In addition to IT, this
Services survey deals with business
24%
processes, such as Finance &
Administration (F&A), Logistics
and Procurement. We were
also very interested in the
differences between industries.
Figure 1 : Participating industries


We used the sourcing strategy
approach of Capgemini as a
guide to structure our
questionnaire and our survey.
In this five-phase closed loop
process, organisations should
continuously go through the
cycle in order to define and
execute the right sourcing
strategy.

Outline on the Sourcing Strategy Approach

Capgemini‟s Sourcing Strategy Approach focuses on the process from
defining potential sourcing strategies to implementing the selected
strategy and managing the delivery. It comprises 5 phases, in a closed
loop, because efficiency and business dynamics may require a change
of sourcing mode.

1. Analysis and Definition - 2. Scenario Planning and
scoping and evaluating all Business Case - analysing
sourcing modes the most beneficial sourcing
modes in more detail
3. Selection and Preparation 4. Transition or Migration -
- preparing the organisation full implementation of the
for change to the preferred right sourcing strategy
sourcing mode
5. Delivery or Operations -
monitor, control and manage
the sourced process


1. Processes currently outsourced and future plans
1. Functions currently outsourced and future plans

2. Why organisations outsource
2. Why do organisations
outsource and risks risks do
and which what they see
6. Demand organisation they see

3. Business case

5. Change management

4. Select and prepare for the
partnership

Figure 2 : Relation between chapters and approach

We have clustered our results In this survey we sometimes
according to the different use the terminology insourcer
phases of the sourcing strategy and outsourcer. The outsourcer
process. The first chapter will delegates processes and/or
provide an overview of selected tasks to the insourcer. The
sourcing modes and strategies insourcer is also referred to as
in general, which processes supplier or vendor. With
were outsourced, moved into a insourcer we do not mean
SSC and what are the sourcing insourcing which refers to
strategy plans. companies assigning processes
within the company that were
The other chapters each link to outsource d before.
a different phase of the
sourcing strategy:
1. Processes currently
outsourced and future
plans
2. Why organisations
outsource and which
risks they see
3. Business case
4. Select and prepare for
the partnership
5. Change management
6. Demand organisation


Processes In this chapter we provide an Our results show a difference in
overview of the currently time spent between outsourcing
currently outsourced processes and and SSC initiatives and the time
selected sourcing modes which industries spend on average on
outsourced and were revealed by the survey. a sourcing strategy approach.
future plans We provide these results per
industry: Energy & Utilities, IT processes more sourced
Financial Services and than business processes
Manufacturing. We also asked
IT process outsourcing is more
our participants for their future
mature than business process
plans. All the results are shown
outsourcing. IT is perceived as
with a distinction between
a „commodity‟ which is highly
business processes and IT
available in the market. The
processes.
maturity of the supplier market
is considered high and because
Furthermore, we measured
of competition organisations are
whether and how the activities
convinced pricing is accurate.
of Capgemini‟s sourcing
IT is also linked to innovation
strategy approach were
and different IT domains require
executed by our participants.
specific knowledge.
The approach contains generic
activities which many of the
organisations do carry out.
business processes

Facilities
HR
Finance & accounting
Logistics
Production
Procurement
Marketing
Design

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

IT processes

Infrastructure
Application development
Infrastructure management
Desktop management
Testing

IT processes
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Inf rastructure
Outsourced onshore
Application development
Outsourced of f shore
Inf rastructure management Figure 3 : Overview of outsourced processes
SSC onshore
Desktop management and selected sourcing mode
SSC of f shore
Testing
Not sourced
Capgemini Consulting is the strategy and 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Innovation is defined as is limited. Given the maturity of
invention plus cooperation plus the supplier market these
i
coordination plus collaboration . processes tend to be
All variables are predominantly outsourced more than other
present in successful IT business processes.
sourcing projects.
Logistics is also a business
Offshore sourcing modes process which is outsourced in
were less selected than a high number of cases. The
onshore modes ability of suppliers to offer
economies of scale plays an
Many organisations select a
important role in these
combination of sourcing modes
decisions. The least sourced
for one or more of their IT
business processes are design
processes. Most common was
and marketing activities. The
outsourced onshore in
low result can be explained by
combination with offshore. Over
the perceived strategic nature
25% of the organisations
of these processes.
selected this combination of
sourcing modes for application
Maturity determines the
development and testing.
number of sourcing
strategies in place
Onshore sourcing is preferred
to offshore sourcing. Apparently The maturity of the supplier
“Setting up a shared organisations prefer the ability market, and of the organisation
service centre offshore to control above low labour itself, both impact the number of
is a touchy subject costs. In addition, one processes sourced. The more
which we want to participant mentioned that mature the supplier market the
avoid” offshore sourcing modes also higher the chance a sourcing
brought political issues: “setting strategy is already in place for
up an SSC offshore is a touchy this process within the
subject which we want to organisation. The more mature
avoid”. Although costs are the the organisation, the more
main reason for sourcing, sourcing strategies it is likely to
organisations do not strive for have in place or already
the lowest possible costs. replaced with a new strategy.
Organisations are aiming for an
optimum of lowest costs, Adoption of sourcing
political stability and control. strategies per industry
There is no relationship
Facilities, HR and F&A are the
between specific industries and
most mature sourced
sourcing strategies for certain
business processes
processes. Our analysis of the
Facilities, HR and F&A are non- results does not show a notable
differentiating processes. In preference of any one of the
general the long term industries for IT sourcing or
sustainable competitive business process sourcing. All
advantage of these processes industries source all type of


processes. We expected Preferences of the industry
differences between industries for a certain sourcing mode
to be able to distinguish an
Financial Services
early adopter. Since no industry
organisations did not select
shows an evidently higher
SSC as sourcing mode either
average of sourced processes,
for IT nor for business
we have to conclude that
processes. This can be
sourcing maturity level primarily
explained by our belief that
depends on the organisation
Financial Services
itself, and is not related to an
organisations are more mature
industry.
and have redefined sourcing
However, if we break down strategies, resulting in a shift
industries, we can see from SSC to outsourcing.
differences. In addition, if there
are a number of organisations
in an industry which outsource,
the number of suppliers
increases and further cost to
serve decreases, hereby
influencing sourcing maturity.

IT sourcing

Energy & Utilities
Financial Services
Manuf acturing

0% 20% 40% 60% 80% 100%

process sourcing
business process sourcing

Outsourced Energy & Utilities
SSC Financial Services
Not sourced Manuf acturing
0% 60% 80% 100%
0% 20% 40% 60% 80% 100%

Figure 4 : Selected sourcing mode per industry


70,0% referring mainly to HR and F&A,
60,0%
as IT is already moved to
offshore locations in most
50,0% cases. Some other processes
40,0% (e.g. Cleaning Services) can
30,0% SSC only be executed onshore due
Outsourced to the nature of the process.
20,0%

10,0%

0,0%
Current Future
situation situation

Figure 5 : Future situation

Forecast of the processes to
be sourced within the next
five years
Future sourcing plans indicate
that, whilst the number of
outsourced processes are likely
to increase, the number of SSC
processes will remain
unchanged. This is not because
no new SSCs will be
established. Our results show
that there will be an increase of
new SSC initiatives and
simultaneously a decrease of
SSCs, due to the shift from
SSC to outsource for those
more mature organisations.

With regard to the selection of
the sourcing location, the
percentage of plans for moving
offshore is less than 10%. Two
important remarks should be
made about this. Especially for
IT, the location might appear
onshore to the outsourcer, but
the insourcer might balance
onshore, nearshore and
offshore locations and work with
the client as a unified team.
Those participants, who
mentioned offshore as potential
future sourcing mode, were


Sourcing strategy approach
All organisations perform
activities to define, select,
prepare, implement and
execute their sourcing strategy.
Participants were asked which
activities were executed and
how much time and attention
was spent. Attention was
measured by time spent for
monitoring and supervising
activities.

100%
100%
% activities of Sourcing Strategy

90% 90%
Strategy approach executred
% activities of Sourcing

80% 80%
approach executred

70% 70%
60%
60%
50% Energy & Utilities
50% 40%
Financial Services
40% 30%
Manuf acturing
20%
30%
10%
20% 0%
10% Analysis and definition Preparation and Selection Delivery or Operations
Scenario Planning and BusinessTransition or Migration
Case

0%

Figure 6 : Executed activities per phase

Time spent on defining a initiatives (11+ months ). This
sourcing strategy seems to be influenced by the
involvement of Procurement
When we look at the time which leading to long contract
is spent to create a sourcing negotiations. Especially during
strategy, there is a difference the selection and preparation
between outsourcing and SSC. phase, fewer activities are
The average time spent on performed as supplier selection
outsourcing initiatives (20+ and contract negotiation are not
months) is almost twice as necessary for an SSC.
much as the time spent on SSC


Conclusion and our
perspective
IT outsourcing is still more
mature than business process
outsourcing. Also onshore is
more preferred in comparison to
offshore. Organisations are
aiming for an optimum of lowest
costs, political stability and
control.

The sourcing maturity links to
the individual organisation and
does not seem to depend on
the industry. Facilities, HR and
F&A are the most mature
sourced business processes.

Future sourcing plans indicate
the number of outsourced
processes to increase. The
number of SSC processes will
remain unchanged. The
average time spent on
outsourcing initiatives is almost
twice as much as the time spent
on establishing an SSC.

We expect organisations to use
a combination of sourcing
modes to realise their sourcing
strategy. In a multi-mode
sourcing solution, global
resources, cost-efficient
processes and extensive
experience in diverse
geographies, disciplines and
industries, are bundled to
achieve cost reductions,
streamlined processes,
innovation, competitive
advantage and growth. In such
a solution most of the
operational processes are
brought to an offshore location
and the more tactical and
strategic processes are
delivered onshore or nearshore.


Why The long-term impact of the Outsourcing and transforming
credit crunch is uncertain for the processes at the same time
organisations many organisations, but is the is perceived as high risk. One
sudden economic downturn a
outsource and good reason to re-evaluate your
interviewed manufacturer
mentioned “We only outsource
which risks they sourcing strategy? Have the a process if stability of the
reasons and risks for sourcing process is ensured; don‟t
see changed due to current events? outsource your mess for less”.
Why do organisations choose
outsourcing/SSC? And are Cost reduction remains the
there differences between most important reason for
industries? sourcing. In line with other
surveys this shows that
This chapter provides an organisations still associate
“Don’t outsource your
overview of the reasons and sourcing with cost effectiveness
mess for less”
risks. It also gives insight into As a result of the current
the differences and similarities economic downturn,
between industries. organisations feel the pressure
to reduce costs and reduce
Reasons for sourcing working capital. Many
Reasons for outsourcing are organisations are turning to
similar to those for setting up an sourcing for achieving short
SSC. The differences we found term cost savings or other
are related to the readiness to financial benefits.
outsource.

Outsourcing Reasons Shared service centre

Cost reduction
Cost reduction

Improve quality
Improve quality

Improve business focus

Headcount reduction
Headcount reduction

Increase flexibility

35% 30% 25% 20% 15% 10% 5% 0% 0% 5% 10% 15% 20% 25% 30% 35%

Figure 7 : Reason (above 5%) for outsourcing and SSC


Outsourcing Reasons Shared service centre

Cost reduction
Cost reduction
Manufacturing
Financial Services Improve quality
Improve quality

E&U
Improve businessfocus

Headcount reduction
Headcount reduction
Manufacturing
Increase flexibility Finance
Energy & Utilities
% 10% 15% 20% 25% 30% Obtain knowledge
Obtain knowledge

Increase efficiency
Increase efficiency
Because others
outsource / have a SSC

50% 40% 30% 20% 10% 0% 0% 10% 20% 30% 40% 50%

Figure 8 : Reasons (above 5%) by industry

Reasons - industries
Energy & Utilities organisations
compared
indicated that the most
Manufacturers indicate that they important reason for
use both sourcing strategies to establishing an SSC is to
focus more on their core improve quality. They find this
business, which results in cost more important than cost
reduction and improved reduction and improved
business focus. Products are business focus. The Energy &
tangible and the pressure to set Utilities industry also see
new product standards is high. outsourcing as a gateway to
Some of the Manufacturing knowledge and competence.
organisations even mentioned
they are driven by customer
pressure to improve standards
and, therefore, source
processes.

Financial Services
organisations indicate that cost
reduction and headcount
reduction are important reasons
for sourcing. Headcount
reduction was mentioned as a
reason for an SSC more often
in comparison to other
industries.


Outsourcing Risks Shared service centre

Dependency on
Dependency on
suppliersupplier / SSC
/ SSC

Loss of quality of quality
Loss

Loss ofLoss of knowledge
knowledge

Impact on organisation

Loss of business alignment

25% 20% 15% 10% 5% 0% 0% 5% 10% 15% 20% 25%

Figure 9 : Risks (above 5%) for outsourcing and SSC

Risks of sourcing outsourcing was insignificant
compared to the impact of
Overall, the perceived risks of
not delivering to our
outsourcing correspond to
customer on time”.
those of an SSC. We did,
however, find four key o Organisations have a strong
differences. focus on quality when setting
up an SSC. As mentioned
o Organisations choose their
before, organisations see an
sourcing strategy based on
SSC as a vehicle to improve
risk mitigation. The
quality. At the same time,
perceived risks of
they perceive loss of quality
outsourcing are related to
as the highest risk. In the
the commercial relationship
preparation of an SSC the
between the insourcer and
key question is - how do
the outsourcer.
organisations ensure the
Organisations anticipate on
desired quality level?
a possible lock-in with the
supplier. The tangible o Loss of business alignment
benefits of the outsourcing is only perceived as a risk
deal may be outweighed by when establishing an SSC.
the costs and perceived We did expect to find that
risks associated with loss of business alignment
“Cost reduction was outsourcing. was also perceived as a risk
insignificant compared
of outsourcing. This was not
to not delivering to our o By selecting an SSC,
the case. Whilst, by
customer on time” organisations want to ensure
outsourcing a process, the
proximity to the business,
distance between service
avoiding dependency on
provider and customer
external suppliers and loss
increases. It seems that
of knowledge. As a
organisations do not
participant mentioned,
perceive this distance to be
“Speed and flexibility is
a major issue.
crucial to us. In this case,
the cost reduction created by


Outsourcing Risks Shared service centre

Dependency on
Dependency on external supplier
Manufacturing supplier / SSC

Financial Services Loss of quality of quality
Loss
E&U
Loss of Loss of knowledge
knowledge



5% 10% 15% 20% 25% 30% Loss ofLoss of confidentiality
confidentiality

Loss of control of control
Loss

Increaseof support needed
Increase of support needed

30% 25% 20% 15% 10% 5% 0% 0% 5% 10% 15% 20% 25% 30%

Figure 10 : Risks (above 5%) by industry

Risks - industries compared have to be disentangled which
could cause loss of business
Manufacturing organisations
alignment between the
perceive dependency on the
organisation and the SSC.
supplier and loss of knowledge
as high risks of outsourcing. As
mentioned before, Energy & Utilities organisations
manufacturers have a strong mainly bring in external
drive to reduce costs and suppliers to obtain knowledge,
improve business focus. Loss of not to improve quality. In
knowledge and dependency on comparing the reasons and
the supplier are perceived as risks of sourcing in both the
road blocks to achieving these SSC and the outsourcing
goals. modes, we found a correlation
between the reasons for one
Financial Services sourcing mode and risks of the
organisations perceive the loss other. Improving quality, for
of business alignment as a high example, is the most important
risk of establishing an SSC, far reason for establishing an SSC
higher in comparison to the but the potential for reduced
other industries surveyed. quality is perceived as the
Financial Services highest risk of outsourcing.
organisations are service Gaining knowledge, for
providers and see information example, is an important reason
and employees as valuable for agreeing to outsource
assets. Processes within services but losing knowledge
Financial Services is seen to be a high risk when
organisations are also highly establishing an SSC.
interwoven, in particular HR and
IT processes. These processes


Conclusion and our entering into more strategic
perspective partnerships, for which
knowledge transfer and
The reasons and risks innovation are important
associated with each sourcing drivers. In our opinion, the full
mode have not been changed added value of innovation by
by current events. Cost outsourcing is not yet
reduction remains the most discovered, but this is just a
important reason for matter of time.
organisations to (out)source.

The survey results show
expected quality from
outsourcing is lower than
moving to an SSC. This might
be perception as outsourcing is
often managed through
performance contracts unlike
SSCs.

Many differences between
organisations are caused by
their business strategy. Do they
have a „customer intimacy‟,
„product leadership‟ or
„operational excellence‟
strategy? In our opinion, the
right reasons for choosing
whether to use the outsourcing
or SSC mode are those which
best align with your business
strategy. It helps to consider
several sourcing modes, in the
analysis and definition phase,
when identifying the right
sourcing strategy. Some
organisations take multi-
sourcing to the extreme leading
to complex onshore and
offshore multivendor relations.

Although only a small number
of participants mentioned
innovation as a reason for
outsourcing, we expect this
number to increase in the
coming years. Due to pressure
to differentiate from
competitors, organisations are


Business Case The business case is a crucial
Components of the business
deliverable and a milestone
case
document in the scenario
planning and business case 90% of the participants
phase, when the sourcing mentioned cost reduction as the
strategy is translated to a major driver within their
tactical level. The most business case, followed by
beneficial sourcing modes are headcount reduction (58%) and
analysed in more detail both cultural impact (42%).
qualitatively and quantitatively.
Other components mentioned
We asked our participants include:
about their business case and
the required return on o strategic objective
investment. We also questioned o added value of the sourcing
the components within their party
business case. o customer satisfaction

Pay-back period o organisational impact
o synergy advantages
Overall we see that more than
80% of the organisations o quality
surveyed aim for a pay-back
period of less than 4 years. The
majority of the participants are
aiming for a pay-back period of
between 2 and 4 years. In the
Financial Services industry, we
1 see organisations aiming for
0,9 longer term pay-back period.
0,8
100%
0,7 90%
Percentage

0,6 80%
70% Manufacturing
0,5
Percentage

60%
Financial Services
0,4 50%
Energy & Utilities
0,3 40%
30% Overall
0,2
20%
0,1 10%
0 0%

0<->2 0<->2 2<->4 2<->4 4<->6
4<->6
Pay-back period in years
ROI in years

Figure 11 : Pay-back period


Outsourcing Strategy Survey 2009 2010

Outsourcing Strategy Survey 2009 2010

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