The outsourcing industry is failing to invest in the skills needed to capture the full value from outsourcing engagements, an Accenture-sponsored study from HfS Research reveals.
The report, entitled “Is Good Enough Really Good Enough? The Great Talent Paradox in Outsourcing,” confirms that in order to achieve sustainable value beyond cost reduction, both buyers and providers of outsourcing must increase their focus on developing talent.
According to the report, which featured a survey of executives from 282 enterprises, two examples of strategic business skills are increasingly important to enterprise executives: defining business objectives beyond cost reduction and efficiency (83 percent regarded this as important or critical) and influencing executives (77 percent). However, executives acknowledge that their current skill levels are deficient in these areas.
Barely a third of enterprise outsourcing customers believe their current governance talent – the people responsible for managing the service relationship – can drive innovation or define business outcomes. And only about half of outsourcing providers have established formal training programs to develop industry expertise and skills in analytics and relationship management.
This failure to invest has created a “talent paradox.” As outsourcing moves from the back office to the middle and front office, where value creation is paramount, and as buyers seek more sustainable business outcomes beyond merely cost reduction, neither buyers nor providers are making the necessary investments in the key driver of value creation – people.
“If outsourcing is to deliver on its full potential, buyers as well as providers need to invest in developing the skills and talent to capture the greater levels of value available from fourth and fifth generation BPO solutions,” said Mike Salvino, group chief executive, Business Process Outsourcing, Accenture. “The study highlights the growing talent gap between what the industry and its clients aspire to achieve and the lack of sufficient investment in people to make it happen.”
The research illustrates that the majority of enterprises’ outsourcing governance teams are comprised largely of procurement professionals, contract negotiators and project executives who are not learning the necessary skills to shift their focus from tactical project management to strategic business alignment. Enterprise leaders have set up their governance teams to fulfill tactical demands in the early phases of outsourcing to mitigate risk, but fail to develop the necessary strategic business skills as their engagements mature and their needs move beyond managing tactical operations. The root of the paradox is that too many enterprise leaders are not focused enough on talent development and consequently leaving a substantial amount of value on the table.
“To be successful at achieving maximum value from outsourcing, enterprise outsourcing executives need to work collaboratively with their service providers to create an environment of learning and innovation, in addition to operational excellence,” said Phil Fersht, CEO and founder, HfS Research, and author of the report. “A quality outsourcing provider should deliver the appropriate talent, technology and process acumen, but this will only reap rewards when the ambitious outsourcing buyer can work with their provider to define business outcomes together and forge a realistic path to achieve them.”
The research study shows that the keys to improvement in outsourcing initiatives lie in refreshing the talent pool available to enterprises – not only their own internal talent, but also the talent from the service provider.
“The bottom line is that outsourcing business or IT functions is never ’done’ and with proper investments in talent, the outsourcing governance team has continual opportunities to improve productivity, efficiency and access to critical data,” said Salvino.