Study: outsourcing trends shifting

A new study has revealed that a number of Canadian executives are more willing to partner and share both the risks and rewards with outsourcers. As well, reducing costs -- while still important -- is no longer the driving force behind a company’s decision to outsource services.

The study, entitled Outsourcing: Shared Risks and Shared Rewards, was conducted by telephone interview for Accenture by IDC Canada Ltd. from December 2002 to January 2003, and is a snapshot of 175 Canadian executives’ perceptions toward outsourcing.

According to the report, outsourcing is not just about saving money anymore. In fact, in many cases outsourcing clients expect the vendor to offer more in the partnership than just reducing costs, and want the service provider to "guarantee…a positive impact on many business outcomes," said Ron Babin, associate partner with Accenture in Toronto.

"(Canadian executives) want somebody who will work with them in a partnership relationship," Babin said. In other words, executives are looking to develop broader relationships with other companies, while at the same time expanding the scope and breadth of the skills within their companies, Babin said.

Nearly two-thirds of respondents (64 percent) said they consider a service provider’s willingness to share some risk when selecting an outsourcing company.

A similar study conducted a year ago by Accenture found that Canadian companies were outsourcing services in an effort to cut costs.

While saving money is still important, Babin said this latest study found that executives are now more willing to accept strategic outsourcing as a way to drive change within their companies, especially in light of economic changes.

Jason Bremner, program manager outsourcing services with IDC Canada in Toronto, said change is no longer considered a bad word, as it relates to outsourcing of services.

"Canadian executives are saying that change is actually good," he said. "More and more companies use outsourcing as a springboard to change some aspect of the organization."

In the past, Bremner said, whenever the word outsourcing was discussed, people generally got a bad connotation. "Outsourcing meant loss of control (and) high degree of change."

Fast forward a number of years and now several companies are finding that the change within their companies as a result of outsourcing doesn’t promote the same fear factor as it did before. A lot of that has to do with the greater degree of education about what companies should expect from outsourcing and the fact that the more and more companies are doing it, Bremner said.

Ninety-five percent of executives surveyed said they were looking to affect some degree of change within their organizations as a result of the outsourcing arrangement. For 34 percent of respondents, outsourcing is an effective method for improving business processes.

The phrase, "skin in the game" is one that comes to mind for Bremner.

He said customers are learning they can demand that service providers have "skin" in their businesses. In other words, if the customer does well, then so does the provider. .

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