Make way for new outsourcing ecosystem

Kerry Hallard, Chief executive, National Outsourcing Association discusses the new technologies and business models transforming convention 

Disruption in the outsourcing industry over the past 12 months surpasses changes seen during the last 12 years. Some say outsourcing is set to become the industrial revolution of the 21st century, while others claim the end of the industry is nigh.

To determine what the future actually has in store, the National Outsourcing Association launched Outsourcing in 2020, an industry-wide study to discover what the face of modern outsourcing will look like in five years’ time.

The results were extremely positive and forecast significant change. Firstly, our research indicated that outsourcing’s popularity will grow between now and 2020, with the vast majority of respondents planning to increase their use of outsourcing and only a select few indicating they will be scaling back their outsourcing activity. So much for the impending death of the industry.

The research also revealed that the drivers motivating companies to outsource are changing and in a thoroughly contemporary manner. Yes, cutting costs was still a significant driver – it always is – but for the first time we saw accessing new digital technology and improving the end-customer experience were comparably popular as reasons to outsource.

What to expect

Both service providers and their clients were also in favour of sharing risk to reap greater rewards from their outsourcing, with four key changes to the future of outsourcing contracts expected. Contract values will be more outcome-based, providers will be contracted as systems integrators sharing risk, procurement will become a more important part of the process and notice periods will become significantly shorter.

A new breed of niche, specialist service providers is set to gain significant market share from their larger competitors

On the buy-side, many companies expect to transition to cloud and as-a-service models, where they only pay for what they use. Across the board, there will be increased investment in a number of exciting areas, including innovation, digital, data analytics, robotic process automation and artificial intelligence. Meanwhile, don’t expect to see any renewed investment in reshoring or backsourcing; it’s unlikely there will be a significant increase in offshoring either.

While there’s clearly going to be a lot of technological investment in the build up to 2020, it’s important to remember that technology is just the enabler. In the future, a multitude of best-of-breed vendors will utilise this technology to deliver to the needs of their clients, namely customer-centric operations.

Data has become the new gold and service providers will have an essential role to play in mining it, refining it and keeping it secure on behalf of their clients.

The picture that Outsourcing in 2020 has painted is that of a dynamic, new outsourcing ecosystem, with the industry set to become simultaneously more collaborative and more competitive. A new breed of niche, specialist service providers is set to gain significant market share from their larger competitors. Established outsourcing giants will need to partner with their smaller adversaries or, in some cases, face extinction.

The speed and willingness with which these companies adapt and develop new skills will determine who wins and who loses in 2020. Some big outsourcing names will disappear in the next decade as a result.

The full Outsourcing in 2020 research report, complete with statistics, will be available in the Outsourcing Yearbook 2016. To receive your free copy early next year, go to the National Outsourcing Association website and register your interest.