March 26, 2013

Notes from IAOP 2013 World Summit: Is Outsourcing Really Dead?

After attending the thought provoking presentation “Is Outsourcing Dead?” by Cliff Justice, KPMG and Lee Coulter, Ascension Healthcare, I have some observations.  It looks like the whole dynamics of the industry is changing, and that this represents a fundamental shift in thinking rather than a temporary trend.

The leaders among business services organizations are embracing a new global delivery concept, which KPMG calls “Extended Global Enterprise” or “EGE”. EGE includes end-to-end processes, with internal resources and outsourced service providers working together towards the goal of delivering high-value services.

As a result of this paradigm shift, client expectations are changing. Service providers need to adjust or become irrelevant. Forget about transactional long-term mega-deals with the emphasis on back office and TCO metrics. Labor arbitrage is more and more out of the equation. Some argue that even location matters less. All of which begs the question of whether outsourcing is dead or is instead evolving into something broader and wider than the traditional model? I think that the latter is true.

The new EGE includes outsourced partners, not just vendors, where clear business and financial alignment are crucial, where value is expected at every customer touch point.  The focus is on smaller Agile partnerships that are “best of breed” and best of geographical locations, delivering solutions for the middle and front office.  Cloud, social, mobile, and big data change the rules of engagement fast. Amazon Web Services capitalized on these game changers and has emerged as the leading EGE.

We at Waverley believe that organizations should position themselves to benefit from the latest developments and the “new normal” dynamics of the industry. To us it means working smarter, not just faster and cheaper.