Executives Rave About Control Given By Outsourcing

September 25, 2003 (PLANSPONSOR.com) - Business executives have long turned to outsourcing as a cost-cutting measure, but now the majority (86%) said outsourcing also gives them control over business outcomes.

The most important aspect of the control given to business executives was the ability to plan.   Further, more than half (55%) said that outsourcing allows their firm to implement strategies and change at a faster and more controlled rate, according to an Accenture survey of 809 executives in the United States, United Kingdom, France and Germany who were interviewed by telephone in July 2003.

Other levels of control were also reported in :

  • reliability
  • cost variability improvements
  • effective implementation of ideas.

While this increased control did not come overnight, the turnaround did not take long.   More than half (57%) of those polled began to experience control gains within the first eight months of an outsourcing agreement.   Breaking it down further, 47% (27% of the total) saw control improvements as soon as the deal was signed; the remaining 53% (30% of the total) said that control increased once operations were transferred and stabilized – an adjustment period Accenture says typically lasts six to eight months.

“Industry leaders are beginning to view outsourcing as a prescription for change, versus an antidote to rising costs,” said John Rollins, a partner in Accenture’s Products operating group, in a statement.

With the increased control and cost reductions, it comes at no surprise that more than eight out of 10 executives surveyed said they are committed to outsourcing at least one business function permanently, with only 14% planning to use outsourcing on a temporary basis to rehabilitate key functions and return them in-house once efficiencies are realized.   Overall, Accenture found outsourcing to be most popular in IT functions (43%), followed by:

  • 36% – supply chain
  • 31% – learning/training
  • 25% – human resources
  • 21% – finance and accounting
  • 13% – customer relationship management.

Measuring Outsourcing Success

Even with increased control, the focus for 30% of the sample on outsourcing’s impact   is on business outcomes such as shareholder value and revenues are on the leading edge.   By industry, more retail executives said they measure the success of their outsourcing agreements by calculating business outcomes (34%) than did respondents in any other industry.   Additionally, with the money being saved, almost three-quarters (73%) said they would redistribute the cost benefits of outsourcing to either the bottom line or growth efforts.

By comparison, 57% said they measure service levels, such as those related to claims processing or call center responsiveness.   This measure was primarily concentrated in the health and life sciences group (60%) more than in any other industry.