Despite challenges, notably from in-company automation, outsourcers have the opportunity to up their game and expand
There is a common complaint in the outsourcing industry. Providers create brilliant services which beat in-house provision on every count. But potential clients are reluctant to sign up. Outsourcing is still a hard sell.
So what’s the best way to win over doubters? First up, it’s worth sketching out the scale of the challenge.
A recent survey by Illuma Research for software consultancy MooD International shows what IT directors really think about outsourcing. The priority? Almost half said outsourcers should aim to deliver revenue generation and growth. By contrast, only one in five cited cost reduction as the most critical area.
Clearly, they understand outsourcing is about a step-change in performance, not merely saving a few pennies. Outsourcers need to acknowledge that. Making life simple is crucial as 57 per cent of IT directors said their job is more complex to manage and 46 per cent that their job satisfaction has declined.
Selling your services
Add to this that 58 per cent said it has become more difficult for outsourcers to deliver on budget and 76 per cent that outsourcers aren’t aligned with their business goals, and the message is clear: business pitches need to spell out how they can make life easier for IT directors in a clear and unambiguous way.
Alas, so often this opportunity is missed. Vivek Madan, a partner at consultancy OC&C, has worked with many companies assessing potential partners. He observes: “On innovation, outsourcing firms can come across as underwhelming when they pitch to a new client. This is primarily because outsourcers don’t always excel at articulating value added.”
He claims the mindset is often wrong. “They’ll settle for a bid being incrementally better than the next and simply do what the client has asked of them rather than thinking outside of the cost box to deliver outcomes a client might not have thought about, such as employee engagement, consumer advocacy, knock-on efficiencies, risk management or corporate social responsibility.”
Big claims will need strong evidence to win over sceptical boards. Contact centre Ventrica has won business from McDonald’s, Worldpay and Agent Provocateur by using case studies to spell out how it can deliver gains.
Ventrica founder and managing director Dino Forte says: “The best way of convincing clients who are unfamiliar with outsourcing is through case studies that demonstrate how similar companies in their sector have realised significant commercial benefits. This allows them to identify and envisage how this can work for them too.” Vague claims get you nowhere, he warns.
Winning over potential clients
Supply chain outsourcer Flex says the case study approach is just the start. Mike Meades, Flex general manager, says: “I think one of the best ways to convince C-suite bosses to move towards outsourcing is to provide both case study evidence and also a tailored solution to the specific needs of a business.
“Companies want to see a proven track record from an outsource provider that not only delivers financial and operational improvements, but also shows the ability to manage risk to allay very typical concerns within an organisation that is outsourcing, particularly for the first time.” Facts and figures, supported by a detailed exposition of how it was achieved before, make a good case.
I dislike the term outsourcing and never use it with clients or within the industry – instead we use the term technology partnership
Exit clauses are a great way to win over worriers. The old days when companies signed decades-long deals with no chance of leaving are long gone. Nicholas Mobbs, co-founder of Outbox, a European IT outsourcer, says an exit clause must be backed up with a guarantee the process will be done smoothly.
“The outsourcing partner needs to transfer all the data back to the contractor or to the new outsourcing partner, plus provide adequate expertise for it to succeed without them,” he says. “This contract clause avoids concerns about vendor lock-in, where a company feels trapped by contract with one outsourcing vendor.”
It should be emphasised that outsourcing isn’t a sales job, vendor to buyer. It’s a partnership. Brian Borack, chief operating officer of IT provider SoftServe, says: “I dislike the term outsourcing and never use it with clients or within the industry – instead we use the term technology partnership. Clients are choosing a partner they want to bet on with a skillset they cannot find elsewhere.”
Above all, the mission when pitching is to arrive at a common understanding. Mike Whitchurch, senior vice president at CGI, the world’s fifth-largest outsourcer, says: “Outsourcing projects need to be fully aligned to the business vision of the organisation. This means the IT outsourcing provider needs to demonstrate they understand the business and can add value to it in a way that supports the overall business objectives.”
Recent National Outsourcing Association figures show 78 per cent of companies and consultancies expect to expand their usage of outsourcing towards 2020. Only a fraction of 1 per cent will reduce it. Conditions have never been better. Service providers simply need to up their game – and get pitching.