Future of Outsourcing

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FUTURE OF OUTSOURCING raconteur.net 8 RACONTEUR 11 / 09 / 2016 01 BPM NOT BPO It's all change for the industry's most fun- damental concept. Business process out- sourcing is changing into business process management, as partners stop thinking about their relationship as a buyer-vendor and more as a union of minds. "Gone are the days when outsourcing or the acronym BPO was synonymous with cost-cutting or labour arbitrage," says Keshav R. Murugesh, group chief executive of outsourcer WNS Global Services and current chairman of the Indian outsourcing association Nasscom BPM Council. "Today, it is about partnering to drive better business outcomes leverag - ing the domain expertise of the partner, high-end technology and analytics. It is about partnering to ride disruptive business trends, which is a complete change from the humble beginnings of outsourcing for cost efficiencies alone. Thus, the change in terminology as well – it is business process management now: managing processes effi - ciently and smartly to drive sustainable and profitable business growth." 03 LOCAL GOVERNMENT Austerity continues to drive the search for lower costs and higher efficiencies across government. For local government that means more outsourcing. Paul Tombs, head of public services at Zurich Munic - ipal, observes: "Recent years have seen a clear trend in local government towards outsourcing. Even though public-sector spending has decreased, the value of out - sourced contracts signed by councils has sky-rocketed. In just the first six months of 2016, their value increased by 84 per cent." His source for those numbers is the ar vato Outsourcing Index. "We also know from our own research, the Zurich Munic - ipal New World of Risk report, that local au- thorities spend around 25 per cent of their annual expenditure – a total of around £45 billion – on procuring goods and services from third parties. Some larger councils are outsourcing up to 60 per cent of their services," he says. Wind of change keeps on blowing Outsourcing is expanding across the globe, striving for new heights of efficiency and accountability. Here are six top trends reshaping the industry OUTSOURCING TRENDS CHARLES ORTON-JONES 04 CHANGING CONTRACTS The days of 20-year government deals are over. These days the trend is for three to five- year contracts, with plenty of get-out claus- es. One of the keys to this shift is the prom- inence of the Crown Commercial Service, introduced in 2010 by Francis Maude at the Cabinet Office and chief procurement officer Bill Crothers. The Crown Commercial Service was set up to train civil servants to negotiate contracts as ferociously as any private-sector body. "We are moving away from... the days when a major service integrator could charge us £30,000 to change a logo on a webpage," declared Mr Maude. No IT contract was to exceed £100 million without good reason. When government departments think about outsourcing deals, the Crown Commercial Service is on hand to offer support. Chief ex - ecutive of Serco's UK central government di- vision Kevin Craven notes a definite change: "They have gone even more into the need to be intelligent clients, writing intelligent con- tracts. They've got a standard of supplier and behaviour they want to see. They are being quite tough at enforcing that – much tough- er clients." The next trend is to push for more public contracts to be open-book. 06 TRANSFORMATION A common boast of outsourcing is that tasks are more than delegated; they are stream- lined, automated and re-engineered. Today the industry is focusing on that step-change mentality more than ever. For example, ro- botic process automation experts Genfour were asked to help utility company Co-oper- ative Energy cope with mundane tasks such as change of occupier notifications. Gen- four did more than assume the role. It de- veloped an automatic processing system in seven days, which mapped on to the Co-op- erative Energy's existing systems. Hayley Gibson, industrial queries team manager at Co-operative Energy, says the system slot- ted into the team, processing five times the amount of work a week. "Quite a few of the team were getting to the point where they couldn't go on much longer working these hours, so I think it actually saved our team," she says. Stories like this will keep the out - sourcing industry growing, no matter the economic weather. 02 NEW FRONTIERS The buccaneering spirit of adventure flows through the outsourcing world. New mar- kets and new cities are always being brought into the mainstream. A chat with the top brass quickly turns into a world geography lesson. "We're definitely seeing new lo - cations being used for outsourcing," says Aruna Jayanthi, chief executive of busi- ness services at Capgemini. "We've recently opened a new centre in Russia – not many outsourcing providers have a base there, but we expect it to become a key location in the near future. Guatemala is also coming up strong as a nearshore option for the United States, as both the Spanish and English language skills there are fantastic. Manila, although more of a traditional location, will still hold gravitas as a centre for outsourcing excellence. But we see less of the classic call centre operations as there is a big transfor - mation taking place in that space, and they are increasingly becoming omnichannel with interactions happening via e-mail, messaging and social platforms." 05 CYBER SECURITY Hackers and malware aren't going away. In fact, the threat from cyber attacks is multi- plying. In 2015 the number of spear-phish- ing campaigns targeted at employees rose 55 per cent, while ransomware rose 35 per cent, according to Symantec. The securi- ty institute AV-Test recorded more than 390,000 new malicious programs each day. As a result companies are struggling to cope. "With many companies unable to fill key cyber-security roles, we will see an increase in businesses outsourcing se - curity," says Raj Samani, chief technology officer for Europe, the Middle East and Africa at Intel Security. "Our Hacking the Skills Shortage report highlights how or - ganisations plan to address the interna- tional shortage of cyber-security skills. Certain skills are in high demand. Our re- search found that the most desirable skills are intrusion detection, secure software development and attack mitigation." With technolo- gy accelerat- ing, the globalisation of the sourcing indus- try, and the as-a-ser- vice economy making it easier for organ- isations to leverage innovation to become more customer-centric, more dynamic and easier to do business with, there is going to be some levelling of the sourcing land - scape. With so many players operating in this globalised market, there has never been a greater need for a global standard that both buyers and provid - ers in sourcing can adopt in their ap- proaches to unlock optimal value from their partnerships. It is for this reason that the National Outsourcing Association (NOA) has been developing its Global Standards Programme, a suite of accreditation programmes aimed at helping organi - sations on both the buy and supply side achieve the utmost success with their sourcing, and a cru - cial part of the NOA's ongoing campaign to professionalise the sourcing industry. One such example is our Corporate Accred - itation Programme. Participating organ- isations regard the process as a journey towards sourcing ex- cellence, confirming competency, tackling weaknesses, and as- suring customers and stakeholders they're in the safest hands. We're seeing a number of large, prominent buyers of sourcing follow in the footsteps of high-profile organisations such as the BBC and sign up for corporate accred - itation, particularly those operating in heavily regulated industries, including those in the public sector. So, what is it all about? The Corporate Accreditation Pro - gramme has been developed to sit above the existing framework out- lined in the NOA's Sourcing Life Cycle Model, with accreditation giving or- ganisations that participate a much better picture of their sourcing ma- turity, and highlighting strengths and weaknesses in their existing approach. This involves high-level decision-makers from across the or - ganisation contributing their perspec- tives on different touchpoints in the contract. NOA software is then used to consolidate these views, highlighting prominent trends and issues. Accredi - tation is conducted by an external NOA auditor, who assess- es the organisation's sourcing capabilities following a day of evi- dence-gathering onsite. The Life Cycle Model is in itself a framework that acts as a global stand- ard for excellent sourcing, having been used, critiqued and refined by more than 200 organisations, ensuring it re- mains the definitive guide for sourcing best practice globally. It is also free to access for all NOA members. The NOA has plenty of experience in accreditation having previously con - tributed to BSI and ISO guidelines for sourcing, and having been an award- ing and accrediting body for a decade. For those businesses going through the NOA's Global Standards Pro - gramme, analysis of the output will un- doubtedly initiate the simplification of processes and help create a more efficient sourcing life cycle model. This will lead to the removal of un - necessary costs from procurement pro- cesses and even more efficient sourcing ser- vices acquisition and delivery, giving fur- ther opportunity to create ongoing value through the contract life cycle. Jim Hemmington, director of pro - curement for the BBC, says: "The BBC undertook corporate accreditation to get an external expert analysis of our processes and procedures for the awarding of major outsourced con - tracts. We chose the NOA as an exter- nal accreditor because they are widely recognised as being at the forefront of contract management. Thanks to the programme, we've identified specific areas for refinement, including simple steps we can take to make quick and meaningful improvements." The BBC has told us that they plan to use the NOA's outsourcing standards long into the future, to help demon - strate they are keeping pace with emerging best practice and driving as much value as possible through their outsourced provision. So should you. Striving for a new global standard in sourcing A corporate accreditation scheme is a journey towards sourcing excellence – for buyers and providers OPINION COLUMN Thanks to the programme, we've identified specific areas for refinement, including simple steps we can take to make quick and meaningful improvements KERRY HALL ARD Chief executive National Outsourcing Association

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