Re-inventing outsourcing with operations-as-a-service

With the rise in digital technology driving organisations to focus intensely on costs, agility and innovation, traditional outsourcing is no longer sufficient to deliver further savings and efficiencies

With the rise in digital technology driving organisations to focus intensely on costs, agility and innovation, traditional outsourcing is no longer sufficient to deliver further savings and efficiencies. According to recent regional data from global analyst firm IDC, over the past 18 months, the outsourcing industry has been on the decline, with regional revenues for traditional outsourcers decreasing by US$23.1 billion in 2015.

In order to address this and thrive in today’s digital landscape, organisations need to look to a new class of outsourcing to not only reduce costs but to generate much needed agility and innovation. Forward-thinking leaders have begun to integrate business process outsourcing – the contracting of operations and responsibilities of a specific business process to a third-party service – with Software-as-a-Service (SaaS) and developments in data analytics, automation, connectivity and machine intelligence.

This merging of trends, techniques and technologies has begun to be recognised as Operations-as-a-Service (OaaS), combining proven business process transformation and management disciplines with intelligent, cloud driven technologies. Traditionally, organisations have utilised business process outsourcing (BPO) by operating on their own systems and technology.

With OaaS, organisations can take advantage of cloud-based applications to reduce their traditional IT spend, increase IT flexibility and scalability, while still achieving the operational and service quality advantages that business process outsourcing (BPO) can provide.

Deutsche Bank is one example of a leading organisation that has chosen to adopt a full-scale OaaS solution, opening up new opportunities to be more entrepreneurial, innovative and value-driven. The firm is in the midst of outsourcing its procurement function, with Accenture providing indirect procurement operations and accounts payable processing services.

The bank’s source-to-pay process is being further automated, including processes such as invoice processing and contract compliance management. In addition, the bank’s current on-premise procurement IT platform is being transferred to an on-demand, cloud-based procurement application. In short, this enables a transformed As-a-Service procurement capability to deliver greater cost control, faster procurement processing, streamlined transaction processes and critically an improved user experience for the bank’s procurement teams and its suppliers.

Though many Australian organisations are already experienced at traditional IT and business process outsourcing, unlike Deutsche Bank and other global leaders, they have been slower to adopt OaaS.

There are, however, some notable Australian examples of organisations making the move towards the OaaS model. Interestingly, the Australian public sector has been among the first to move toward the As-a-Service economy, with a Federal ‘cloud first’ policy adopted in 2013, mandating agencies to prioritise public cloud services for new IT purchases.

The NSW Department of Justice, for instance, has united several previously siloed systems under one streamlined As-a-Service model, which is set to transform corporate services within the Department. This kind of advanced SaaS implementation demonstrates a major shift in the direction of widespread OaaS adoption.

While only eight per cent of organisations in Australia and Asia-Pacific have implemented a core enterprise function under the OaaS model, 62 per cent see it as critical or absolutely critical for their organisation, according to research from Accenture and HfS Research.

However, making the switch is no easy feat. In order to adopt OaaS, organisations are required to carry out a complete redesign, incorporating new skills, capabilities, commercial models and a different type of service provider. To achieve this, Australian organisations need to consider the following four key changes:

  • Implement design thinking. Organisations need to rethink the customer, employee and supplier experience, exploit analytics to gain new insights, and integrate robotics and automation for greater efficiency. Customer centred design thinking, coupled with prototyping and iterative development cycles, can bring these elements together and is increasingly being recognised as a prerequisite to drive OaaS based transformation.
  • Exit the cocoon. OaaS requires organisations to break out of the old ways of working, be open to embracing new modes of operation, while establishing partnerships with organisations to provide new ideas, insights, and expertise.
  • Obtain skills on both sides of the fence. Critical for the success of OaaS is building the right skills and capabilities inside the organisation coupled with experience, expertise and cultural fit with the right partners. A blend of specialist management and technology talent is required.
  • Rewrite the rules. Existing rigid outsource contracts should not get in the way of the adoption of OaaS. Organisations need to consider the impact of the shift to OaaS solutions on new and existing contracts. To make way for the successful adoption of OaaS, traditional, fixed-scope contracts with slow change requests need to be replaced with dynamic, flexible agreements that support and encourage innovation.

Leading organisations are already adopting OaaS to deepen customer and supplier relationships, maximise operational efficiencies and improve their bottom line. Those that have yet to start their as-a-service journey risk being left behind as the rules are rewritten and traditional outsourcing is re-invented as Operations-as-a-Service.

Russell Ives is the managing director of Accenture Operations in Australia and New Zealand.

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