Here is a review of comprehensive Norton Rose’s survey “Outsourcing in a brave new world”
As software development company we are focused at IT and software development issues in this survey, which was conducted in 2011 first from 2008.
The survey also found that customers needed to improve ‘management buy-in‘, ‘good supplier/customer relationships‘, and ‘more sophisticated approach to risk‘ areas of their procurement processes if they wanted to archive the maximum benefits from outsourcing.
It is clear that outsourcing has been affected by the economic downturn
The “Outsourcing in a brave new world” survey shows that cost reduction is the most important driver for outsourcing, customers want flexible solutions, and customers have tightened their diligence processes—apart from those applied to key incoming personnel.
The global economic crisis has clearly impacted on outsourcing strategy and deals. The survey shows that:
- 87 percent of customers cited cost reduction as the motivating factor for outsourcing;
- 86 percent of suppliers cited cost reduction as the motivating factor for their customers’ outsourcing;
- 62 percent of suppliers expressed a view that the global financial crisis had resulted in harder price negotiations;
- 69 per cent of respondents mentioned flexibility as a motivating factor for outsourcing, in contrast to less than 10 per cent in the 2008 survey;
- 65 per cent of both suppliers and customers said customers did not do detailed due diligence on the
key personnel involved in an outsourcing project;
- 66 per cent of customers – and 61 per cent of suppliers – thought that due diligence processes had
tightened in the last two years cost reduction as the most common driver for outsourcing.
Low-value services can be outsourced using traditional outsourcing offerings. Looking ahead, we expect higher-value business process services to evolve, that will ride atop multiple underlying cloud computing services. These new services will be based on the ability of business experts in different domains to optimise a process and deliver it via cloud-based IT services.
Cloud computing is referred to as “the next generation of outsourcing.”
Challenges of offshoring
“Outsourcing in a brave new world” survey asked participants what they thought were the advantages and disadvantages of offshoring. The principal disadvantages were a loss of control, different time zones, difficulties in resolving disputes, language and cultural differences, politico-legal risks and the difficulties in managing an offshore supplier.
The advantages included cost savings, resource availability, expertise and productivity gains (particularly if it allowed the adoption of a “follow the sun” business model).
Some participants said insofar as they used offshore providers, they were always captive organisations.
The whole “Outsourcing in a brave new world” survey contains 108 pages and covers the other topics like risk management, cloud computing, offshoring, and innovations in outsourcing.
Once again thanks to Norton Rose for this “Outsourcing in a brave new world” survey.