Research Summary – Outsourcing Sector 2004 – 2012
Executive Summary
There is some confusion over the definitions of the outsourcing and facilities management terms both in industry and academia. Outsourcing is a business model whereby an organisation decides that it will no longer carry out a function in-house. Instead this function will be provided by a third party. Outsourced functions could include manufacturing, IT, accounting, HR and facilities management. The decision to outsource is based on business imperatives such as concentration on core activities, cost savings, risk mitigation and access to resources. Resources such as personnel and facilities may be transferred to the provider.
Between 2004 and 2012 we examined 9 major outsourcing and facilities management relationships involving companies and organisations operating in UK and global domains. This report summarises the findings from our research. It does not concentrate on the individual projects but rather on the particular management features that characterise these relationships.
We summarise this research in four parts:
IT Services (104-107)
IT In-house (108)
Public – Private (109, 118, 119)
Preparing for new relationship (66)
Their relationship performance is compared in the chart above. It should be noted that the majority are struggling to make Outsourcing work and are not reaping satisfactory returns.
Overall Conclusions
Although the Outsourcing sector appears to be mature, growing and increasingly complex, our investigations show that a number of fundamental management issues in both Public and Private organisations still abound. This is borne out by a number of recent high profile failures. There is the potential to provide high quality, collaborative services however clients treat the industry as a way of driving costs down. This has made it into a low margin business which consequently makes it unattractive to high quality managerial talent.
Organisations do not realise the importance of formal relationship management to the success of outsourcing arrangements
Organisations fail to understand that to access the additional benefits of collaboration they need to invest in its management
Relationship management is often confused with commercial management and thus the opportunities of collaboration are bypassed
Standard commercial arrangements generally are not modified to suit partnering and therefore the wrong incentives, inflexible governance and inappropriate performance targets are applied
Clients have unrealistic expectations of implementation and benefits delivery timescales
Clients do not understand what they want; what exactly do they want from their partner?
Clients and suppliers fail to understand their roles as an equal partners
Suppliers over-promise what they can deliver
Lack of development of a joint operating model within the Decision Phase limits the ability to deliver a successful operation
Failure to manage cultural change, including staff resentment, can have a serious, detrimental impact on performance
Failure to understand that collaboration doesn’t occur instantaneously and needs to be managed through a graduated implementation programme
Key supply chain partners must be part of the collaborative operation
Often little thought is devoted to putting in-place effective communication and problem-solving arrangements between the partners
Clients demand greater innovation but fail to put in place the structures needed to foster and support it
Management usually fail to consider the practical implications of collaborative working on business processes and staff
Where both parties learn from experience and maintain their determination to build a successful relationship then outsourcing pays dividends
“They don’t think that we are important. Nobody ever asks us what we can do to help.”
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