OWS05: Collective Insights

The just completed Outsourcing World Summit, the 17th in our global conference series first held in 1998, brought together more than 400 executives and professionals from across the field and around the world. The collective insights of the speakers and delegates would rival Google as a source of information on the topic of outsourcing.

The following is a compilation of 46 top facts, figures, and findings shared over the event’s three days:

FACTS AND FIGURES

1. “Percentage of executive budgets outsourced will grow from 25 percent in February 2004 to 34 percent by year-end 2005.” Michael F. Corbett, Executive Director, International Association of Outsourcing Professionals (IAOP)

2. “As the U.S. economy gets back on track, many routine jobs won’t be returning.  But this doesn’t mean we will have fewer jobs. It means only that we will have fewer routine jobs. A quarter of all Americans now work in jobs that weren’t listed in the Census Bureau’s occupation codes in 1967.”  Robert Reich, former U.S. Secretary of Labor

3. “The U.S. market for business process outsourcing is growing at a CAGR of 9.45 percent and will reach almost $175 billion by year-end 2007.” Chris Disher, Vice President, Booz Allen Hamilton

4. “More than 30 percent of respondents reported being less than satisfied with their outsourcing results (2004 Booz Allen Hamilton G&A Survey). The key issues are lack of innovation, lack of flexibility, service quality, and costs.” Chris Disher, Vice President, Booz Allen Hamilton

5. “An estimated 5.3 million new healthcare workers are needed from 2002-2012 in the U.S.” Fred Brown, former CEO, BJC Healthcare

6. “As much as 60 percent of IT and 55 percent of HR, and 50 percent of purchasing and accounts payables can be outsourced to low ‘factor cost’ locations.” Chris Disher, Vice President, Booz Allen Hamilton

7. “Northwest Airlines achieved a 40 percent, or 19-day, reduction in days sales outstanding (DSO) through outsourcing.” Betsy Sagnes, Director, Cargo Accounting, Northwest Airlines

8. “Eight out of ten CIOs have direct marching orders to move portions of technology services offshore. As a result, the shifting of support delivery, support product development, and support thought leadership around the globe is an irreversible trend.” Ron Muns, CEO and Founder, HDI

9. “Document Process Outsourcing will grow at a 17.9 percent CAGR from 2003 through 2008 – reaching more than $1.5 billion dollars in the U.S.” Holly Muscolino, Director, InfoTrends/CAP Ventures

10. “Six to ten percent of annual corporate revenue is spent on document related activities.” Gregg Groenemann, Director of Marketing Enterprise Services, IKON Office Solutions

11. “Document Process Outsourcing yielded a $400,000 savings in its first year at Hartford Hospital.” Sharon Fried, Corporate Director of Materials Management, Hartford Hospital

12. “Procter & Gamble’s Global Business Services (GBS) Organization, which the company created in 1999, delivered $500 million in savings in its first three years.” Bill Metz, IT External Business Development Manager, Procter & Gamble

13. “Outsourcing contracts are a disaster zone, with 90 percent seeing major issues arise between the parties, and many of these leading to adjudication or litigation.” David Barrett, Partner, Simmons & Simmons

14. “When offshoring, expect to invest 5 to 8 percent of total spend in governance.” Craig Lewis, Managing Director, neoIT

15. “Cymer Corporation outsourced the design of 80 percent of their photolithography laser and focused on the 20 percent that gave them their competitive edge.” Darren Dolcemascolo, Senior Partner, EMS Consulting

16. “Ineffective relationship management can reduce returns by as much as 75 percent.” Danny Ertel, Partner, Vantage Partners, LLC

17. “Overall service provider cost/price savings through economies of scale in multi-process BPO deals is 10 to 15 percent.” Ron Walker, Senior Vice President, EquaTerra

18. “Through transformational outsourcing, Bell Canada has gone from more than 1,200 employees in its real estate organization to just 40.” Jean-Francois Poisson, General Manager – Contract Management, Bell Canada

FINDINGS

1. “Companies only have two sustainable sources of competitive advantage – their brand and their people.” Robert Reich, former U.S. Secretary of Labor

2. “Deciding which processes to outsource should be based on an evaluation of the market maturity – which ranges from early adoption, to growth, maturity, and commoditization.” Chris Disher, Vice President, Booz Allen Hamilton

3. “The top thing that keeps vendors up at night is their ability to continually improve their people and internal processes to meet the ever growing customer demands.” Provider Panel chaired by Michael Corbett

4. “Although national ‘protectionism’ is a hot political topic, it has had little impact, so far, on offshoring activity. Controls and risk management are the more difficult issues and are not yet fully addressed.” Jag Dalal, Principal, JDalal Associates LLC

5. “Global competition is increasing and India’s leading position is being challenged.”  Jag Dalal, Principal, JDalal Associates LLC

6. “When leading change through outsourcing, over communicate – they may not like the news, but they will demand it.” Fred Brown, former CEO, BJC Healthcare

7. “Negotiate as if implementation mattered. Do this by starting with the end at mind; helping the other party to prepare; treating alignment as a shared responsibility; sending one message; and managing negotiation like a business process.” Danny Ertel, Partner, Vantage Partners, LLC

8. “‘Socially-Directed Outsourcing’ is a proactive program to direct a portion of an organization’s outsourcing spending in support of the social interests of its customers and stakeholders.” Michael F. Corbett, Executive Director, International Association of Outsourcing Professionals (IAOP)

9. “Outsourcing is only one piece in the opportunity to develop strategic relationships. The key is to ask the questions: What next and what else?” Abe Eshkenazi, Managing Director, American Express – TBS

10. “Inattention to relationship will cause a decay of services.” Maureen Kelly-Ostrosky, Director, Technology Services, General Growth Properties

11. “Keys to selecting an outsourcing provider are to seek an adaptable and knowledgeable partner; get beyond the contract; focus on business results; be mutually responsive and flexible; and drive continuous improvement.” Kathleen S. Lennon, Operations VP, AT&T Worldwide Customer Service

12. “Document Process Outsourcing, or DPO, is the assignment of an entire document-intensive process to an external provider.” Holly Muscolino, Director, InfoTrends/CAP Ventures

13. “Success in document process outsourcing comes from a focus on people, training, technology and processes; combined with a six-sigma program for continuous improvement, industry specialization, and management of the relationship.” Joann Martin, VP, Pitney Bowes Business Process Solutions

14. “Operating in and managing an outsourced environment requires more structure and rigor than most organizations are accustomed to. Service request management, performance management, problem-change-incident management, and project management are four of the top governance processes required.” Bill Metz, IT External Business Development Manager, Procter & Gamble

15. “Outsourcing contracts should not be seen as a ‘back-stop’ but as an engine of partnership establishment and evolution.” David Barrett, Partner, Simmons & Simmons

16. “As the percent of budgets spent offshore increases over the next few years, factors such as access to top talent, quality improvements, and shorter time to market will rival cost savings as the value drivers.” Craig Lewis, Managing Director, neoIT

17. “Since everything in the manufacturing value chain is not core, and lean is about improving the value chain, then outsourcing is critical to the lean enterprise.” Darren Dolcemascolo, Senior Partner, EMS Consulting

18. “Manufacturing outsourcing is being driven by many factors but is ‘pulled through’ by an ever-expanding community of specialized suppliers that understand your business, can reduce your costs, and can shorten your development time.” Robert E. Corbett, Principal, RE Corbett Associates

19. “Lear’s non-production maintenance repair and operations (MRO) program focus on suppliers that complement its core business of building automotive electronics and interiors. Some of these areas are by-product management, energy management, office supplies, safety supplies, spill equipment, tooling, and water treatment.” Rebecca Spearot, Director, Environmental Management, Lear Corporation

20. “How do we create a successful vendor relationship at Cisco? By focusing on open communications; shared priorities, strategies, and opportunities; negotiating a comprehensive master contract with service level agreements; using a quarterly scorecard to provide timely and relevant feedback – both pro and negative; and shared risk and reward.” Tom Wirth, Manager, Global Business Services, Cisco Systems, Inc.

21. “Organizational psychology provides a powerful tool for addressing the people issues that arise at each stage of a complex transaction like outsourcing.” Dale Keiter, Ph.D., Principal, Management Affiliates and J. Ross Docksey, Partner, Sonnenschein Nath & Rosenthal LLP

22. “Successful outsourcing selling requires an alignment of marketing and sales around a common value assessment methodology.” Kyle Andrews, Vice President, Pretium Partners

23. “Compared to their lesser-known competitors, buyers give well-branded outsourcing firms greater opportunities and allowances. Keep in mind that every interaction shapes the perception of your brand.”  Richard Crespin, CEO, and Brenna Garratt, President, The Delve Group

24. “When launching an outsourcing business, do your due diligence to ensure that your business model is sound, that your prospective clients really need your service, and that your business is structured to make real profits for its shareholders.” Nader Samii, President, Ajuba International

25. “Overall implementation timeframe for business process outsourcing can be 12 to 24 months faster than for internal transformation.” Ron Walker, Senior Vice President, EquaTerra

26. “Most processes have at least three versions: what you THINK the process is; what it ACTUALLY is; and what it COULD be.” Ron Zappile, President, United Technologies Realty, Inc.

27. “Learn to think of services in terms of outcomes, not activities. Reward outcomes incrementally to encourage performance above and beyond the baseline.” Francois Brazeau, Director General – AFD, Public Works and Government Services Canada

Originally Published March 2005