Outsourcing in Europe 2013

Major outsourcing trends and risk factors

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Major outsourcing trends

Cloud computing

Cloud computing has emerged as a viable option for turning a fixed cost into a variable cost. More and more companies are expected to turn to outsourced providers for cloud services.

Big data

Big data is being recognized an important future trend, as large companies must learn how to analyze and use data properly.

Sustainable outsourcing

Sustainable outsourcing is becoming an important component of the outsourcing contract. Companies are aware of their corporate social responsibility and many are careful to ensure that the outsourcer follows their directives.

Service providers and contracts: key drivers

  • Industry-specific solutions: The majority of service providers are not industry-specific. However they focus on offering industry –specific solutions so that the client experiences them as much.
  • Innovation: Although innovation is an important requirement of outsourcing, it is not addressed in 41% of outsourcing agreements. Often there is a mismatch in terms of what providers consider to be innovative elements and what clients expect. Providers could be more specific in explaining innovation to clients.
  • Ethical working: To attract and retain business from high-profile organizations, service providers must sustain high standards of ethical behavior. Companies should insist that ethical commitments are audited periodically.

Transition and retained organization: key drivers

  • Transformation: If a business transitions a service or function that is soundly run, the provider will be better prepared to focus on excellence. The business can outsource at a lower cost, without paying for expensive remedial action.
  • Managing expectations: Most outsourcing agreements are governed by SLAs. Therefore, both companies and service providers should ensure proper expectation management at the very beginning.
  • Retaining capabilities: It’s important for the business to retain key subject matter specialists who know the business back to front. They will help manage the relationship with the provider and can build the function up again in-house if necessary.
  • External advisors: Getting an independent view on outsourcing is critical. An expert adviser will look at an organization’s risk appetite and assess what services the organization will accept being outsourced.

Risks of outsourcing

When organizations outsource IT services or business processes, a number of risks have to be addressed. The top three risks identified by our respondents were:

  • Dependency on external service provider
  • Loss of control
  • Impact on quality

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