Everyone’s doing it. Touting the numbers. Researchers get paid to find the percentages and totals, and writers and analysts get paid to put a spin on them.  But I think that research studies and advice about the outsourcing market often miss the boat.  

For evidence, look no further than a report yesterday (written by CRM Management editors) about the findings in Op2i’s recent Outsourcing 2010 survey.  Here’s their anemic conclusion from their data: 

While interest in outsourcing has increased, focus has yet again shifted to cost reduction, with suppliers pressured to deliver more for less – the U turn from strategic to tactical outsourcing has the potential to push the outsourcing industry back a decade ….

This analysis can lead one to believe that outsourcing barely has a pulse these days other than a last-gasp effort at cost reduction – even in an improving global economy.  And it implies that cost reduction is the only part of the pie that outsourcing service providers are grabbing right now.

If I were a potential buyer of outsourcing services, this article would cause me to think I should take an aggressive approach in negotiating the price of services. But by doing so, I would miss the greater value that outsourcing can create and possibly even end up with a failed relationship.

Hopefully, buyers are wise enough to take a broader look and not make decisions based on a niche survey analysis. While there are several examples of the bigger picture of the pulse of today’s outsourcing market, two recent examples were published yesterday — the same day as the anemic outlook.

Blogger Ann All concludes from her interviews of multiple industry consultants and analysts that “labor arbitrage is out and added value is in.” She wrote:

…I got a snapshot of an outsourcing industry in which clients are trying to get more for their money, but not necessarily by negotiating for the lowest price.

For instance, they’re looking at managed services solutions and asking providers to help identify costly inefficiencies with the buyer’s organization.

A report released yesterday from IAOP (the International Association of Outsourcing Professionals) discusses survey findings that show “outsourcing is being used more strategically for higher knowledge processes.”  The release quotes IAOP Chairman Michael Corbett:

Increasingly companies are looking to do more than cut costs but to add value, increase business flexibility and prepare for future growth.

Buyers of outsourcing services will better serve their organizations’ investments and business objectives by looking at how they can capture the strategic benefits of outsourcing rather than just the tactical, short-term cost benefits. 

It strikes me that buyers looking to their vertical industry publications often see narrow-view analyses and don’t get a big-picture view of outsourcing’s true potential for their organizations. Besides the CRM example, above, HotelNewsNow.com published earlier this week an article of pros and cons of outsourcing for the hotel industry.

While the article rightly presents the pros of outsourcing – including getting the best talent in a highly specialized area” and “thinking out of the box,” the article warns against using outsourcing for customer-facing business processes. As justification for the warning, it cites known problems with English language expertise in many offshore contact center situations.

When are people going to stop automatically equating “outsourcing” with “offshoring?”  There are plenty of American outsourcing companies that hotels could use and avoid the English-language problems – and even several Indian and nearshore providers with established onshore facilities in the USA using American workers.

The article goes on to say list “concierge services” as one of the processes “not likely to be outsourced because of customer-facing issues. I think buyers of outsourcing services can benefit from looking beyond their narrow industry corridor to see what others – more mature in creating value through outsourcing – have done. 

For example, two years ago I wrote an article about how American hospitals are successfully using outsourced concierge services and achieving notable benefits. Hospitals’ need for very careful, sensitive  interaction with end users is perhaps even more complex than for hotels; hospital concierge services deal with families who are distraught over their loved ones’ life-threatening situations.  If outsourcing is successful and beneficial in these instances, I think hotels can learn from that and apply those same strategies to their business.

I believe that some people and organizations in the outsourcing industry could be more careful about projecting meanings to numbers (good or bad) that can mislead potential buyers into making less-effective decisions.

In the meantime, hopefully, the organizations that want to do some outsourcing are looking far and wide for a comprehensive view of decision-making input so executive decisions will result in the best strategies for their organizations.

Since 1998, freelance writer Kathleen Goolsby has studied outsourcing relationships’ successes, failures, trends, and best practices. She has interviewed more than 860 executives at buyer and service provider companies and is the author of “Critical Requirements for Building and Sustaining a Successful Outsourcing Relationship,” a chapter in Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships (December 2006, Gower Publishing). As a freelancer, she also currently serves as the Senior Writer for Outsourcing Center (whose parent company is sourcing advisory firm, Alsbridge) and has authored dozens of articles as well as white papers. In a past role, she was editor of Outsourcing Venture (a former print publication). You can contact Kathleen at ksgoolsby@gmail.com.

Related posts:

1. Buzz Blog’s Outsourcing Pulse List – May 19, 2010