By: Sandy Frinton, PULSE Editor
Collaboration, shared energy, and a sense of belonging defined the scene at IAOP’s OWS24 as outsourcing and sourcing professionals united for the annual Summit in Chicago. The event shared knowledge, ignited connections, and fostered a sense of community among industry peers.
Presented by IAOP and hosted by HCSC and Baker McKenzie at the HCSC/Blue Cross Blue Shield Tower, the event was held May 21-23. In an intimate executive conference setting designed to ensure attendees didn’t miss any sessions, the OWS24 presentations covered digital technologies, social impact, the future of work, collaborative supplier governance, and healthcare and life sciences.
Throughout the three information-packed days, these top five themes emerged from the presentations delivered by industry experts and leaders from IAOP’s Centers of Excellence (CoE):
- The AI Revolution: Artificial Intelligence (AI) and Generative AI (Gen AI) are transforming industries and redefining how we live and work. Regulatory frameworks are needed to ensure responsible AI development and use.
- Unleashing Talent: The future of work involves adapting to new technologies. AI can enhance human work efficiency and be used in recruitment to discover non-traditional talent. Speakers shared how mentorships and college programs can help organizations tap into underleveraged talent and promote diversity.
- Trust and Transparency: Building strong partnerships and successful outsourcing/sourcing relationships relies on trust, transparency, and collaboration.
- New Era of Outsourcing: Outsourcing is now more than just about saving costs or gaining efficiency; it’s about empowering a new kind of professionals. These professionals include “transitional professionals,” who facilitate smooth transitions during outsourcing processes, “governance maestros,” who ensure effective supplier governance, and “impact agents,” who drive innovation and sustainability in a rapidly changing environment. We are entering the new eras of “Industry 5.0,” which focuses on impact and sustainability, and the “Imagination Age,” where creativity meets innovation.
- Shifting Contracting Landscape: With increasingly complex ecosystems, multi-supplier relationships, and the emergence of hyperscalers, the traditional approach to contracting is changing. Labor arbitrage, once a significant factor in outsourcing decisions, is becoming less important. Transactional contracts concentrating on particular tasks or deliverables are declining in value compared to outcome-based contracts and relationships.
For OWS24 highlights, read on:
The Power of “T”
Kate Vitasek, a renowned expert in collaborative relationships and a member of the IAOP Leadership Hall of Fame, set the tone for the Summit with her keynote on “The Power of T.” She emphasized the importance of trust, transparency, and collaboration in building strong teams and achieving success.
An author and faculty member at the University of Tennessee, Vitasek is known for her pioneering research and Vested® business model, which fosters highly collaborative partnerships.
In her engaging address, Vitasek challenged the audience to rethink their approach to trust. She advocated for a shift from the traditional notion of earning trust to a more proactive stance of choosing to trust, inspiring a new perspective on team dynamics.
To illustrate the power of teamwork, Vitasek asked the audience to stretch out their arms and form the letter “T” individually. Then, she invited a supplier, provider, and advisor onto the stage, representing a supply chain. Linking arms made it easier for them to stay in the position longer, demonstrating how supporting each other makes it easier to achieve goals than working alone.
Vitasek emphasized the importance of choosing to trust and communicate openly rather than relying on assumptions or blame. She encouraged the audience to adopt a mindset of " leaning in” and choosing to trust their partners rather than defaulting to mistrust and suspicion. By doing so, she argued that organizations can create more successful and sustainable relationships that benefit all parties involved.
Vitasek shared a success formula for moving relationships from typical to transformational:
- Choose to trust
- Add transparency
- Remove transactional thinking
This results in high-performing teams that attract the best talent and employees who want to work on these accounts because they are fun and rewarding.
Vitasek’s research finds that top-performing organizations have eliminated transactional economics and contracts. Instead, they focus on “relational contracts” based on trust, mutual respect, and shared goals rather than simply focusing on the contract terms. These contracts foster collaboration and innovation, leading to more successful outsourcing relationships.
Future Industry Trends
Dan Schuffert, Divisional Vice President of Strategic Sourcing at HCSC (Health Care Service Corporation), presented a bright future for outsourcing with innovations in AI and automation and cloud-based solutions driving greater efficiency and agility. Strengthened cybersecurity, enhanced talent management, and deeper data-driven insights will define the next era of outsourcing, he said.
Schuffert shared a humorous story about AI being everywhere – even his dry cleaners in a farm town outside Chicago that advertises they use AI technology to launder clothes. When he asked what that meant, the clerk didn’t have an explanation but assured him his cleaner clothes would make him feel better.
Schuffert also discussed the evolving landscape of cybersecurity, citing a recent breach at Change Healthcare and the subsequent ransomware attack. He highlighted the importance of data protection, compliance, and regulation in the healthcare industry and the need for companies to stay updated on the latest cybersecurity threats and solutions.
He also noted that globalization has increased the complexity of outsourcing. He mentioned that companies hesitate to send work offshore due to contract restrictions and government contracts.
Schuffert also discussed the impact of COVID-19 on the industry, citing the need for companies to adapt to new norms and challenges. The pandemic has accelerated digital transformation and highlighted the importance of agility and flexibility in outsourcing operations. Leaders are now under pressure to make decisions quickly and adapt to changing circumstances.
Innovation was among the other trends he discussed. While senior leaders are committed to achieving it, measuring success remains difficult. He suggested that there is an opportunity to address innovation and drive outcomes proactively.
Schuffert discussed the importance of governance and risk management, noting that companies must manage their vendors and contracts more effectively. He also highlighted the importance of supplier risk governance and the need for organizations to change their behavior and culture to achieve this.
Artificial Intelligence Regulatory Landscape
Lawyers from Kirkland & Ellis shared insights into the European Union’s groundbreaking Artificial Intelligence Act, the world’s first legislative framework specifically for AI. The act, which will regulate the development and use of AI, introduce a significant penalty framework for violation, and have a broad extraterritorial effect, is expected to set a precedent for AI regulation globally.
The act categorizes AI risks into unacceptable, high, low, minimal, and risks specific to Gen AI. It applies to providers and deployers of AI systems in the EU market and companies outside the EU selling into the market.
However, the experts said the AI Act is not intended to stifle AI development or use unduly.
“The cat is out of the bag with AI,” said Emma Flett, a partner at Kirkland & Ellis in London. “There are many pros and many cons. Legislating for that is genuinely a true challenge. Like the General Data Protection Regulation (GDPR), the EU wants to instill trust and be a safe space for AI.”
To prepare for the legislation, Max Harris and Ben Zeris, partner and associate, respectively, emphasized the importance of companies understanding their AI use by creating AI inventories, developing compliance frameworks, conducting risk assessments, implementing AI governance policies, and staying up-to-date on the regulation’s implementation timeline.
The second part of this presentation focused on AI in healthcare in the U.S., which lags behind Europe. U.S. regulation of AI is still developing and shifting with increasing interest and activity at the federal, state, and local levels.
The lawyers said regulation would likely follow the privacy framework as a sectoral-based, “patchwork” system. As legislation and rules develop around the use of AI, the lawsuits have already started and are likely to continue, the speakers said.
Despite barriers to the early adoption of AI, many in the healthcare industry predict widespread utilization by the end of the decade. AI is used for clinical decision support, billing and coding, payor processes, pharmaceutical development/clinical trials, and medical imaging.
The experts emphasized ethics and bias as critical considerations, urging transparency and algorithmic fairness. They recommended a governance framework for AI that details the scope, purpose, and principles of AI use within organizations.
Cybersecurity, Data Privacy, and AI Intelligence Risks in Contracting
In an era where “data is the new gold” and AI is transforming industries, Cristina Messerschmidt, Senior Associate, North America Privacy and Technology Practice, Baker McKenzie, spoke about how to contract for cybersecurity, AI, and data privacy effectively.
When contracting with AI vendors and third parties, she said that organizations must consider three key privacy considerations: training algorithms, security of prompts and outputs, and data processing.
The presentation also discussed the risks associated with non-compliance, including fines, enforcement actions, and the potential for regulatory authorities to order the unwinding of algorithms developed using improperly obtained personal data.
Top cybersecurity threats facing organizations in 2024 include business email compromise, crypto-mining malware, advanced persistent threats, ransomware, and virtual currency heists.
Messerschmidt emphasized the importance of transparency or clarity about how personal data will be used. She also discussed the concept of reasonableness, which is often ambiguous in data privacy laws.
Transformational Outsourcing Trends
IAOP’s Digital Technologies CoE experts shared trends in transformational outsourcing and digital technologies, including the shift to hyperscale cloud solutions, the role of AI in workforce transformation, and strategies for managing workforce transitions.
Peter George, a partner at Baker McKenzie, said the transition from legacy environments to hyperscale cloud is revolutionizing deal structure. Today, deals no longer involve buyers and suppliers but also hyperscalers, transforming the outsourcing landscape.
George noted this trend is reminiscent of the “mega deal” era, where complex data migration projects were combined with long-term services contracts to fund the investment required for the migration. This makes for exciting and challenging work for sourcing attorneys like George.
Vinny Sanchez, a partner at DLA Piper, views the current period as a transformative time for organizations driven by the rapid evolution of digital technologies. According to Sanchez, the ecosystems are undergoing significant changes, with partnerships and outsourcing relationships becoming increasingly complex.
The shift towards digital labor, supported by human expertise, adds to this complexity as more players enter the market and hyperscalers emerge. Sanchez notes that all software is moving to the cloud, and big vendors are aggressively migrating their customers to cloud-based solutions within the next 5-7 years. He predicts everything will be cloud-based and outsourced, with SaaS providers managing tech stacks and holding customers’ data.
This trend raises significant risks as organizations become beholden to a few major players. With three major players (Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform) dominating the market, Sanchez suggested that the future will be shaped by these dominant players and their influence on the ecosystem.
“I believe at some point, to some degree, the big three are going to be regulated utilities because every business is going to depend on them,” he said.
Peter Mueller, Vice President of Partnerships, Americas, at Scalehub, highlighted using AI to augment human work. According to Mueller, AI helps to transfer work to humans, making it more efficient. He believes AI is “democratizing the work,” making it more accessible and reducing the fear that it will lead to job losses.
The increase in companies creating captive centers was also a trend the experts are seeing.
“Pre-pandemic, most companies were selling off their captives,” Sanchez said. “Post-pandemic, we’re seeing a huge increase in the desire to create global delivery centers around the globe. Some are driven by tax. Others want control over the situation and think they can mitigate the risk. It’s exciting to watch the shift in the market.”
Juan Coronado, Managing Director of Deloitte Consulting, said a common theme emerging from his recent client conversations about captives is their desire for control and innovation and to own their skills, resources, and intellectual property.
Tapping Unconventional Talent
By 2030, there will be a talent gap to fill 85 million jobs, roughly the entire population of Germany, equating to about $85 trillion in unrealized revenue for organizations, shared Pam Sands, Vice President, Strategy & Partnership-Diversity Office, Kelly.
To address this gap, the importance of tapping underleveraged talent through programs like the Global Mentorship Initiative, Driving Forward, and DePaul University’s Innovation Development Lab was stressed.
- GMI bridges the gap between graduation and first career jobs for young professionals from diverse communities. Leveraging digital resources, mentorship, AI, and human connection builds a more equitable workforce of tomorrow's leaders. GMI has impacted 7,500 students in 100 countries, helping them connect to companies and recruiters and preparing them for confident job searches. It has enlisted 6,000 mentors in 127 countries. Within six months, nearly 75 percent of students have jobs.
- Driving Forward’s vision is that every college student in America should have an equal opportunity to achieve their career objectives and create a better future for themselves and their communities. It empowers first-generation and under-resourced college students through experiential learning focused on business communication, professional development, and social and industry capital.
- The DePaul ID Lab solves real-industry problems through student and professor collaboration. It has a team of 40-plus members, including UI/UX Designers, Scrum Masters, Software Developers, Data Scientists, and volunteers. The lab also holds client workshops, CIO Luncheons, conferences, and a distinguished guest speaker series.
AI can improve recruitment, particularly when targeting young workers from diverse cultural backgrounds. Browning emphasized that traditional approaches to job recruitment may not be effective in other cultures and that using American-based language and job descriptions can lower effectiveness. AI can help mitigate this by detecting job descriptions and communications biases, making them more culturally relevant and inclusive. He said the technology also helps sort through large stacks of CVs and resumes, reducing biased decisions and identifying top candidates.
The speakers urged the Summit attendees to mentor young unconventional talent by connecting them with their networks, hire college graduates in underserved locations to fulfill the promise of education leading to better job opportunities and provide universities with innovative projects that companies can’t get to for students to gain real-world experience.
Becoming Impact Agents
James Donovan, CEO of ADEC Innovations, emphasized the need for GBS providers to be impact agents and effect positive change. He challenged the audience to think creatively about communicating ESG initiatives and making a positive impact.
Donovan spoke about the transformational shifts in the industry that are bringing us to “Industry 5.0,” which is focused on impact and the need for the role of transitional impact professionals.
“AI will either change the world for the better, or the bots will take over everything. I don't know; it could be in between,” he said. “But the reality is that we’re in transition. I hope to be able to introduce this concept. We all need to be transitional impact professionals.”
He argued that GBS providers are uniquely positioned to leverage data and trusted relationships to help companies achieve their goals.
“If we want to make a difference as suppliers, we are in a fantastic position to leverage the data that either our clients trust with us or our headquarters trust with us to help them on a better journey,” he said. “GBS is probably the number one best-positioned organization to help companies on their journey because they’re trusted partners.”
The Rise of the Imagination Age
Kevin Parikh, Chairman and CEO of Avasant, spoke about a new era we are quickly accelerating toward called Enlightened Disruption. In this era, innovation enables humanity to instantly transform ideas into action, and what we imagine becomes real.
According to Parikh, four primary disruption cycles since the 1940s have led to the emergence of new world orders. He explained that each cycle begins with a global crisis, followed by an innovative solution, resulting in a rewritten world order that redefines borders, realigns allies, and resets trading partners.
AI is the key to ending the current “Poly Crisis,” defined by energy, financial, and food insecurity, the significant challenges of the emergence of global conflict zones, the rise in trade and economic instability, and the race for scarce resources.
This will lead to the rise of the “Imagination Age,” an enlightened period when human creativity and innovation are the driving forces behind progress in an interconnected world.
The industry will also move from managed services to “tech-enabled services,” marked by innovation and strategic-driven deals. He noted that geography will no longer matter, and virtual centers will replace traditional physical locations.
“Arbitrage is falling like a rock. Costs and salaries are going up. The rest of the world, particularly India and Mexico, are not as poor as they used to be. Technology innovation is also driving that value for labor. How are we going to drive value out of deals? Procurement today, unmanaged, is driving a race to the bottom. There is no more money to squeeze out of these deals,” Parikh said.
In the Imagination Age, AI will enhance human productivity, he said, noting that 60-70 percent of resources time today can be absorbed by Gen AI. This will enable free-flowing thoughts, the everyday use of predictive analytics and digital assistants, and data that travels with individuals, providing instant access to infinite information.
AI will also accelerate global goals, with 79 percent of sustainable development goals (SDGs) reached using AI and 93 percent of environmental targets being realized, Parikh said. This will also be a period when the digital divide is bridged, and equal employment opportunities are created.
“The Imagination Age will be a period for sustained Enlightened Disruption where AI enables humanity to instantly transform ideas to action,” said Parikh, who was inducted into the IAOP Leadership Hall of Fame at the Summit.
AI Reshaping Work Environments
IAOP’s Future of Work CoE leadership team explored the interplay between technology, staffing, and real estate. Speakers examined how innovative technological solutions revolutionize workplace environments and human resource strategies.
Amita Goyal, a Partner at Zinnov, shared the results of a collaborative study conducted by Zinnov and Ness Digital Engineering on the impact of Gen AI on the productivity of engineers in India, Eastern Europe, and other regions.
The study empirically measured AI’s impact on engineers’ work, focusing on three levels of complexity. The study aimed to understand how AI affects engineers’ feelings about their work, including productivity, engagement, and overall job satisfaction.
The results showed that when Gen AI was added to engineers’ work, senior engineers’ productivity increased at higher rates than junior engineers. Gen AI excelled at documentation, knowledge, and change management tasks, enabling global teams to collaborate more homogeneously and standardly. Goyal emphasized that these findings significantly affect how teams will be structured and spread.
Sands discussed Kelly’s efforts to leverage technology to improve its services and prepare for the future of work. She highlighted three tools Kelly is using: Robotic Process Automation to help clients automate mundane and repetitive tasks, freeing up human workers to focus on more complex tasks; KellyNow, a new platform that allows job seekers to search for job openings and apply to positions that match their skills and qualifications within a few clicks; and recruitment technology to help recruiters quickly identify the best candidates for job openings.
Sands also shared her thoughts on the future of work and the importance of being proactive in preparing for it. She noted that the staffing industry is typically reactive, waiting for economic changes to occur.
Instead, Kelly is focusing on developing skills for tomorrow’s jobs. These include new roles such as “garbage designer,” which designs solutions to reduce waste and turn waste into valuable products; “organ creator,” which involves creating artificial organs for transplantation; “drone traffic optimizer,” which manages drone traffic; and “autonomous car mechanics,” who repair self-driving vehicles.
Chris Zlocki, Head of Client Experience and EVP of Global Occupier Services at Colliers, discussed the changing nature of real estate and the importance of adapting to clients’ evolving needs.
He highlighted the need to think about location and space more flexibly and agilely, focusing on short-term intervals rather than long-term leases. This requires a shift in mindset from thinking about real estate as a fixed asset to seeing it as a dynamic and adaptable tool that can support the needs of the business.
Zlocki also emphasizes the importance of designing spaces that are intentionally focused on specific activities and tasks rather than just providing generic office space. He uses the analogy of the “office as a magnet” to describe the need for spaces designed to attract and retain talent rather than simply being a mandate.
Governance Maestros
According to experts from Avasant, in today’s complex multi-supplier environment, supplier governance leaders must evolve from managers to maestros to realize the most value from strategic relationships.
Supplier governance leaders must orchestrate different functions and stakeholders, provide oversight, analytics, direction, and feedback, and be more business-orientated, strategic, intentional, proactive, and transparent. This need is driven by the increasing complexity of supply chains and the emphasis on risk.
“Looking back over the last 30 years, these ecosystems of our supply base have grown and gotten much more complex,” said Mike Wheeler Avasant, Partner, Supply Chain, and Management Practice Owner. “This very complex environment requires a lot more coordination and intentionality.”
Jim Lee, Avasant Principal, Supplier Governance Practice Lead, urged the leaders attending OWS to “think of yourself as a maestro, not just a conductor or an arranger of music.”
“Like a conductor in a symphony, there needs to be an arrangement, a coordination of all the different sections,” Lee said. “There must be clarity in what you're doing to fully realize the benefits of your supplier relationships.”
Governing the Procurement and Deployment of AI
DLA Piper’s Sanchez illuminated the intricacies of AI technology and its impact on businesses.
“AI will be around for a long time and continue driving that market. The fear of missing out is driving companies to adopt AI; everyone wants to deploy it and want it done now. Some of the timelines these CEOs put out there are insane. Everything is AI now,” he said.
Sanchez also emphasized that the AI ecosystem has become a complex web of relationships involving multiple players and stakeholders, including hyperscalers, cloud providers, and data scientists.
Sanchez highlighted the need for clear and transparent communication about the deployment model and how AI will be used as a significant hurdle. He noted that many suppliers use technical jargon that can confuse clients, leading to friction in the procurement process.
Moreover, Sanchez warned about the risks associated with third-party models and platforms, which can be challenging to understand and negotiate. He encouraged clients to ask suppliers about their deployment model and to be cautious about data leakage and model reuse.
While AI can revolutionize industries, it’s essential to approach it cautiously and carefully consider the legal and regulatory implications, according to Sanchez.
Stay tuned to PULSE for more exclusive coverage of OWS24.