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Strategic outsourcing for success
Summary results of the 2008 outsourcing report

Making an informed decision

BEST

Audit Tax Consulting Financial Advisory

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For Five Years Running

Outsourcing is generally recognised as a strategy for producing cost savings, however, by simply following a traditional cost-focused approach, companies may be missing opportunities to gain further competitive advantage. Why Settle For Less? Deloitte Consulting 2008 Outsourcing Report is a global survey report that addresses this issue. The report outlines the findings of a comprehensive research effort to analyse the outsourcing approaches that companies are currently taking, and identify the leading practices, common pitfalls, and lessons learned from the outsourcing experience. The survey team polled over 300 business and IT executives representing outsourcing buyers, outsourcing vendors, and legal firms.

Treating outsourcing as a strategic objective - Are you looking at the bigger picture? In reality, successful outsourcing - and in particular, outsourcing that drives transformation and helps achieve broad strategic goals requires companies to follow a disciplined process that keeps them focused on taking the right steps and making the right decisions. In short, outsourcing initiatives succeed by design, not luck. The report explores the key dimensions of this design - five main dimensions of the outsourcing process that companies must progress through, as well as the factors that must be considered within each in order to reap the full benefits of the outsourcing. These dimensions are: 1. Rightsizing the deal 2. Building a solid foundation 3. Vendor selection now means something different 4. Striking the deal

Cost reduction is the primary factor motivating most outsourcing decisions Did you know? Our survey found that a large percentage of the companies that implemented outsourcing reached their financial objectives and averaged a strategically-important Return on Investment (ROI) of over 25%. However, a much larger than expected level of companyoutsourcer conflict was reported, and many of the companies expressed disappointment with the outsourcers’ overall ability to provide continuous process and technology improvements. While a majority (70%) stated that they were ‘satisfied’ or ‘very satisfied’ with their arrangements - the highest level we have ever seen reported. On further review we found that this 70% felt that they could be achieving more from their outsourcing arrangements. For example: • Only 34% of the executives reported that they had gained important benefits from innovative ideas or transformation of their operations • 35% of executives, including 55% of executives who were not very satisfied with outsourcing, wished their companies had spent more time on vendor evaluation and selection • Asked what they would do differently if they were able to restart their outsourcing projects, 49% of the executives surveyed said they would define service levels that aligned better with their companies’ business goals • The dissatisfied respondents noted underestimated scope; higherthan-expected costs; and poor quality communications, service, and reporting from their service providers Our survey included 31 service provider executives, who suggested that companies may not be positioned to realise the full benefits of outsourcing. By a 3-to-1 margin, these service provider executives felt that their client companies were not prepared for outsourcing that is, the companies didn’t have a solid plan, didn’t have the operational data needed to make sound outsourcing decisions, and/or didn’t understand how the ‘to-be’ organisation would really work.

5. After the deal is signed 1. Rightsizing the deal - Are you outsourcing the right things for the right reasons? The survey results (see figure 1) confirmed that cost reduction is the primary factor motivating most outsourcing decisions. The second most...
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