There was a time when outsourcing contracts lasted a decade or more and the news was littered with headlines of overspending and failed outcomes. Innovative approaches to outsourcing have, however, been quietly evolving over the past five years or so. This shift comes in part to accommodate the speed of technological change that is helping reimagine operating models, but also to match the changing demands of agile organisations’ need for more strategic partnerships.
Traditionally, outsourcing was focused on cost-cutting and improving back-office services. Now strategic partnerships are about collaborating with specialists to integrate new products or value-added services a business cannot efficiently build on its own to innovate, accelerate growth and secure an edge over its competitors.
What strategic partnerships can do
The Global Sourcing Association, a not-for-profit membership association which shares best practice on sourcing, predicts the outsourcing market will become simultaneously more collaborative and more competitive with contracts based on outcomes rather than outputs, and partners sharing risks to benefit from greater rewards for all parties.
Cost pressures continue to weigh on businesses, but to remain competitive, agile organisations must ensure they have access to cutting-edge technology. Without the means or desire to necessarily recruit those skills in-house, business owners are understanding that only when they develop strategic partnerships with experts can they access the tools and skills they need to adapt to the modern world of business.
Moneypenny, a global outsourced communications provider, delivering telephone answering, live chat, switchboard and multichannel customer services, understands the benefit of agile partnerships from both sides of the equation. Moneypenny not only provides agile partnerships, offering smaller companies the artificial intelligence-generated telephony services that they wouldn’t be able to hire in-house, but also bespoke services to multinationals.
In addition, the company nurtures its own agile partnerships with technology experts to tap into the tech they need to further their service offerings to clients.
Moneypenny’s chief executive Joanna Swash says: “Outsourcing used to be a bit of a dirty word. Over time the whole image of outsourcing has changed considerably. Agile partnerships are different now. It’s about making sure you have the right relationships in place and you take the time to really understand what your business problems are, and that’s how you get really strong outsourcing relationships. But you can’t outsource something without being fully invested in it.”
Partnering strategies are changing
Often, outsourcing was about taking away what was often seen as the headache of the non-core services and handing them over to a third party to deal with at a much cheaper cost. Today, cost is less of a priority.
Lengths of contracts have also radically changed. Gone are the decades-long contracts and notice periods that tie in business owners irrespective of the outcomes. Nowadays, contracts are often month by month, or for one or two years. In fact, agile organisations say the length of the contract isn’t an issue because, if you want to retain the partnership, you make sure you’re achieving outcomes to secure the repeat business.
“There’s a big recognition that the world changes very, very quickly. And you need to be able to flex your providers and your internal resources to cope with different kinds of macro-economic conditions, local conditions or staffing. We don’t really want to enter into too long a contract with anybody. And certainly not without the ability to make changes in that relationship as the service progresses,” says Ms Swash.
That flexibility is at the crux of the new strategic partnerships. Businesses need to know that during the peaks and troughs of the business cycle they can buy in the services they need to ensure the smooth flow of business. Owners do not want to have to pay for a product or service they are not benefiting from during a quieter period.
“We’re seeing a different dialogue from even a year to five years ago. In the past, it was very much a supplier relationship focused on key performance indicators and cost delivery. But we’re seeing a big move towards flexibility and agility,” says Kirk Croal, managing director of Huntswood Outsourcing.
Choosing strategic suppliers
Strategic partnerships will only work, however, if they are based on trust and transparency. It’s a substantial leap of faith for organisations, but the rewards are significant. The shift is also coming in the form in which teams work with outsourcers. Mr Croal says, in the past, he may have been working more with the procurement side of the business, but now he works increasingly with clients’ operational teams, which isn’t necessarily the cheapest approach, but can produce the best results for the customer experience.
“Our customers want a strategic partner that is going to be more than just a company which makes stuff for them. We now have companies which share the design, innovation, the collaboration, engineering. Our job is to basically make sure our customers’ product is better than the competition,” says Tony Hague, chief executive of West Midlands-based PP Control & Automation, a strategic outsourcer to manufacturing machine builders.
History shows that it is difficult to catch up if you ignore or delay acting on industry disruption. Agile organisations that view this disruption to outsourcing as a chance to execute real change, even when it may cost more in the short term, will be far better positioned to gain competitive advantage in the long run. Those that don’t risk being left behind by their nimbler competitors.
As Ashish Kumar Gupta, corporate vice president and head of Europe, the Middle East and Africa at HCL Technologies, concludes: “Companies that haven’t been able to change with the times become irrelevant in the market.”