Getting business process outsourcing right in a digital future

Companies used to outsource primarily as a cost-saving strategy. It was only up to several years ago that outsourcing was viewed as useful in many other ways, such as helping companies achieve more customized industry solutions and better goals by capitalizing on more sophisticated provider offerings like advanced technology, AI, analytics and machine learning.

Organizations that are successful in outsourcing services, such as managing manufacturing and back-office effects, are focused on improving their corporate productivity across the board. They want to use the same kinds of processes that they've been using onshore but apply them at a lower cost by optimizing the work. For example, some organizations want to figure out how they can create an online form that allows employees to submit vacation requests weeks in advance. Like they would if they were in-house companies, this will ensure a seamless process that ensures employees get their time off when needed most.

Digital outsourced business: Growing fast

Organizations that are successful in outsourcing services, such as managing manufacturing and back-office effects, are focused on improving their corporate productivity across the board. They want to use the same kinds of processes that they've been using onshore but apply them at a lower cost by optimizing the work. For example, some organizations want to figure out how they can create an online form that allows employees to submit vacation requests weeks in advance. Like they would if they were in-house companies, this will ensure a seamless process that ensures employees get their time off when needed most.

A detailed analysis of 53 business-process-outsourcing deals that closed between 2016 and 2020 reveals that about one quarter included at least one digital component (social media, mobile applications, analytics, automation, cloud, or Internet of Things). However, the number of such deals almost doubled over the five years, with potential opportunity standing in sharp contrast to the overall outsourcing industry's single-digit growth rates.

A decline in outsourcing expenditures of the federal sector is projected, with a decreased focus on outsourcing more general business and administrative activities, but an increased interest in using private companies for specific IT and digital services and achieving technology efficiencies (exhibit).

Overcoming the challenges

As digital sourcing becomes a vast and growing industry, it's essential to have an independent organization that helps regulate the standards of training related to digital sourcing and certified professionals in the field. The importance of this has never been more apparent in light of recent trends that show that buyers prefer vendors registered with the industry councils over those who aren't certified - regardless of price!

These steps are essential in overcoming the cultural challenges and inertia that can arise when adopting new practices. Even when times seem relatively calm and everything seems fine, there is a natural tendency for teams and individuals to want to stick with what they're used to doing. Letting go of what we already know isn't easy, mainly when it directly affects how we interface with our peers daily. Also, digital sourcing doesn't just mean selecting one provider; this also means adopting a new method of working with our current providers who, let's face it, probably aren't always prioritizing digital transformation. Given the many radical changes most organizations now face, some working teams may argue that they can't support such a massive digital change program alongside their other obligations.

Perhaps the biggest challenge is weak sourcing capabilities. Agencies looking to stay competitively positioned have to invest in different kinds of talent, processes and technology to ensure they maintain a posture that keeps them operating in the most efficient way possible. For some companies, sales will continue along with CRM/Marketing. Still, there are so many other players within a company's ecosystem that need to be considered when making an argument for justifying moving into an ecosystem play versus sticking with an on-premise solution (which may not even be an option anymore potentially).

Moreover, sourcing processes themselves increasingly need to incorporate digital and automation—a marked upgrade from the current and largely manual processes that remain in place at too many organizations today. In other words, to access digital from external providers more effectively, companies need more vital skills in using digital internally.

Utilizing advanced digital and automation capabilities will ensure that you build an effective process for acquiring critical business resources. Our analysis has found that doing so can unlock three times the financial impact of traditional sourcing arrangements while also improving the customer experience.

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