A Shift in Agenda: More Companies Outsource for Strategic Value Than to Cut Costs, According to Accenture Survey
NEW YORK; Sept. 25, 2003 – Executives are outsourcing for the control it gives them over business outcomes, not simply as a cost-cutting measure, according to results of a survey from Accenture. The findings indicate that outsourcing, which initially gained appeal as a means of reducing costs, is being embraced for the ability it gives executives to predict business results and support strategic planning.
The survey, which entailed interviews with more than 800 health, manufacturing, retail and travel executives in the United States and Europe, found that an overwhelming majority (86 percent) said that outsourcing gave them more control over business results in a variety of critical areas, the most important being the ability to plan. And while cost-cutting is among these critical areas, the executives also reported equal levels of control in reliability, cost variability improvements, and effective implementation of ideas. More than half (55 percent) of respondents said that outsourcing allows their companies to implement strategies and change at a faster and more controlled rate.
"Industry leaders are beginning to view outsourcing as a prescription for change, versus an antidote to rising costs," said John Rollins, a partner in Accenture’s Products operating group.
More than 80 percent of the executives surveyed said they are committed to outsourcing at least one business function permanently. Only 14 percent said that they plan to use outsourcing on a temporary basis to rehabilitate key functions and return them in-house once efficiencies are realized.
More than half (57 percent) of the executives surveyed said they begin to experience control gains within the first eight months of an outsourcing agreement. Of these, 47 percent (27 percent of all respondents) said they saw control improve as soon as the deal was signed; the remaining 53 percent (30 percent of all respondents) said that control increased once operations were transferred and stabilized — an adjustment period that typically lasts six to eight months. Most outsourcing agreements are structured to last five to 10 years.
“The 30 percent of respondents who measure outsourcing’s impact on such business outcomes as shareholder value and revenues are on the leading edge,” said Rollins. "These outcomes are the true barometers of outsourcing’s value." By comparison, 57 percent said they measure service levels, such as those related to claims processing or call center responsiveness.
Among the survey’s other key findings:
- Outsourcing has expanded. While 43 percent of executives said their companies outsource IT functions, many outsource processes, including supply chain (36 percent), learning/training (31 percent), human resources (25 percent), finance and accounting (21 percent) and customer relationship management (13 percent).
- Almost three-quarters (73 percent) of all respondents said that they would redistribute the cost benefits of outsourcing to either the bottom line or growth efforts.
- More retail executives said they measure the success of their outsourcing agreements by calculating business outcomes (34 percent) than did respondents in any other industry, while more health and life sciences executives said they measure service levels (60 percent) than did executives in any other industry.
As part of the survey, 809 executives in the United States, United Kingdom, France and Germany were interviewed by telephone in July 2003. The executives were from a wide range of industries, including automotive, travel services, transportation, retail, consumer goods and services, industrial equipment, and health and life sciences.
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills, and technologies to help clients improve their performance. With more than 80,000 people in 47 countries, the company generated net revenues of US$11.6 billion for the fiscal year ended August 31, 2002. Its home page is www.accenture.com.
Editor’s Note: Accenture’s Institute for Strategic Research has also conducted complimentary research, "Control: Getting it and Keeping it in BPO," which is available on request.
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