Sep 25, 2003 (02:09 PM EDT)
Outsourcing's Benefits May Be More Than Monetary

Read the Original Article at InformationWeek

Outsourcing wedged its foot in the door as a cost-cutting measure, but it's increasingly viewed as a strategic planning and business outcomes tool, a consulting firm says. According to an Accenture survey of more than 800 executives in the United States and Europe, cost savings are still a key outsourcing benefit, but the additional business controls generated by outsourcing are driving the trend to external providers.

That increased control shows up almost immediately, Accenture said in releasing the survey Thursday, with 25% of respondents reporting first-day improvements in business processes.

"We found those levels of control increasing throughout the transition [to outsourcing] and stabilization periods," said John Rollins, Accenture's products operating group partner. "Over half had recorded perceptible improvements in the first six months of outsourcing."

The most frequently cited improvements included better ability to plan, higher levels of operational reliability, and more rapid implementation of new strategies and initiatives.

The trend toward deriving broader business benefits from outsourcing stems from both increased maturity and experience with the process and, the spread of outsourcing beyond IT departments, Rollins said.

While IT services continues to be the leading outsourced function, more companies are turning to outside sources for supply-chain operations, learning and training, human resources, accounting and financial services as well as customer relationship management. 43% of the executives surveyed have IT outsourcing arrangements in place.

Supply-chain management was seen as the most rapidly rising area for outsourcing, with 36% of the respondents undertaking it, followed by 31% initiating outside learning and training functions.

"The effect of moving outsourcing into multiple business process has brought a wider range of business experience and insight to bear," Rollins said.

The trend looks to be long-lasting, with more than 80% of the survey respondents expressing commitment to permanent outsourcing of at least one key business function. Only 14% viewed outsourcing as a temporary solution for key function operations.

The broader view of outsourcing benefits should be matched by broader, more flexible and more constantly monitored arrangements with outsourcers, the company said. Rather than traditional service-level agreements, Rollins recommended that negotiations and contracts with outsourcers include active governance measurements that extend throughout the life of the arrangement.

"Because the outsourcer is more involved with business outcomes," Rollins said, "it's important that both sides understand the alignment of outsourcer performance with business outcomes, and the approach needs to remain responsive as long as the outsourcing contract is in effect."