Next wave for outsourcing

One of the world’s leading outsourcing advisors says a silent wave of outsourcing is rising in Australia as skills shortages bite and major industrial and commercial sectors are increasingly starved of talent and the ability to innovate.

“A powerful wave of outsourcing innovation and change is building within key sectors of the Australian economy, driven by multiple forces linking outsourcing supply closer to demand,” says Mr Peter Bendor-Samuel, Founder and CEO of the Everest Group .

Bendor-Samuel, who is an acclaimed author and winner of the Outsourcing World Achievement Award maintains the resulting surge in outsourcing will have increasing profound benefits within industries such as manufacturing, resources, energy, financial services and government over the next two to three years.

During a visit to Australia hosted by Australian Everest Group Managing Principal and CEO Peter Barta, Bendor-Samuel said new outsourcing contracts were more modular and fluid in nature than in the past, with buyers being able to adopt only the components they need as and when they need them.

“Monolithic outsourcing solutions in the past involved major up-front costs, long planning horizons and all-or-nothing investments,” Bendor-Samuel says.

“The new trend is toward fluid platforms that deliver flexible services.”

Multiple forces driving this change include:

  • Technology

Service Oriented Architecture (SOA) is unbundling technology platforms so customers can select the services relevant to them as they need them.

Service Oriented Business Architecture’s unbundling of monolithic applications provides a flexible, fluid and agile technology platform.

Remote infrastructure management technology, meanwhile, is enabling delivery of services from anywhere to anywhere

  • Talent.

A scarcity of talent is occurring at many points of need in Australia.

(Australia’s Minerals Council says the minerals industry will need to employ another 90,000 people by 2020, while a recent Australian Industry-Deloitte survey found skills shortages are clearly limiting industry’s ability to innovate).

Inflexible labour pools.

“Where strong demand exists for a restricted supply of skills, for example, it becomes far harder to draw people away from preferred employment and lifestyle centres,” Bendor-Samuel says.

Availability of low-cost talent centres globally, which can be drawn upon to offset Australian skills shortages and increase the country’s ability to grow and to create better opportunities for local skills.

  • Delivery

SOA principles are being extended throughout industry operations.

A Just-In-Time (JIT) procurement model is evolving, so outsourced services can be drawn upon as and where needed.

Companies no longer need to purchase an entire set of services of which most will be unused while they apply the component they do need at a particular time.

With the worldwide drive toward greater corporate compliance and safeguarding individual privacy, industry leaders have developed auditable outsourcing packages with world’s best compliance standards.

“This wave of change will significantly impact the cost, performance and flexibility of services operations,” says Peter Bendor Samuel.

“Savings of 50 per cent plus can be expected from the low costs of interacting with the latest subscriptions-based outsourcing models.”

“The changes driving demand for outsourcing in Australia have led to the rise of Do-It-Yourself outsourcing, which has both benefits and pitfalls.”

“As companies steer away from the monolithic outsourcing deals, they are endeavouring to cherry pick the best offerings arising from the forces driving change.”

“Some companies are doing well in this process, while others are really struggling to get the value they anticipated.”

“It is easy for buyers to fall into the trap of trusting suppliers too much in the sales process because it is the inexpensive option – i.e. no advisor fees,” he explains.

“However, there is an extremely long and painful tail of consequences from doing a flawed deal for both buyer and supplier.”

“Cost of compliance with world’s best professional and statutory standards are obvious examples where deep pitfalls can and do occur.”

“Boards and CEOs in Australia really need to pay close attention to this issue, because when a company outsources, it entrusts a slice of its business future to a supplier,” Bendor-Samuel says.

“Leaving that selection and implementation to middle managers who can be ill equipped, untrained and inexperienced and then hoping for the best is rarely a successful strategy in our experience.”

“In fact, a part of Everest’s business in Australia and globally comes from helping buyers and suppliers remediate bad deals.”

“Remediation can take years depending on how bad the situation.”

“Part of our business also is centred on equipping companies to benefit from DIY outsourcing, using our knowledge and experience to add value, speed up execution and tighten their process.”

“For the more complex deals, there will always be a need for a broader service involving specialist advisors able to keep pace with the ever-changing outsourcing marketplace,” he says.

Outsourcing surprisingly remains a very complex transaction because there are so many variables, hidden risks and exit costs.

“The old adage that prevention is better than cure hold true every time,” Bendor-Samuel says.

The global Everest Group serves many of the world’s top 1000 companies through offices in Dallas, Delhi, London, Amsterdam, New York, Toronto, Sydney and Melbourne.

It is also a market leader in Australia and an international opinion and information leader in global outsourcing through resources such as The Everest Research Institute, and Everest’s Outsourcing Centre, which is visited by 400,000 people a year.

An industry leader since 1991 when it created the sourcing consulting category, Everest Group has earned a worldwide reputation for ongoing innovation as the Group helps clients achieve maximum value from their sourcing strategy and implementation.

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