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Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012
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Deloitte 2012 Global Outsourcing and Insourcing Survey Executive Summary 2012

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Deloitte 2012 Global Outsourcing and Insourcing Survey Executive …

Deloitte 2012 Global Outsourcing and Insourcing Survey Executive
Summary - Feb 2012

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  • 1. 2012 Global Outsourcing and Insourcing Survey ExecutiveSummaryDeloitte Consulting LLPFebruary 2012
  • 2. ContentsKey findings 3About the survey 4Current state of outsourcing and future outsourcing plans 6Contract performance and relationship management 10Most recent outsourcing experience and outcome 15Cloud based outsourcing 22Worldwide outsourcing contacts 25
  • 3. Key findings  Outsourcing continues to “go mainstream”, becoming another standard business practice that should be evaluated as business needs mandate  The outsourcing market continues to confuse outsourcing with offshoring. Many respondents still see the two processes as inseparable — even though many times outsourced work never Current and Future leaves the originating country Outsourcing  Information Technology, Finance and Human Resources continue to lead other business processes in outsourcing, though all business processes are expecting to see increases in the use of outsourcing and offshoring in the near future  Vendor management organizations, while highly competent at “day-to-day” activities, find themselves underutilized when it comes to driving strategic value Contract Performance  A significant number of respondents have terminated contracts with their vendors in the past, & Relationship primarily due to concerns with the quality of services. Management  Insourcing, though rare, does occur. We are beginning to see more clients contemplating insourcing functions due to vendor non-performance or changes in business strategy  Though generally satisfied with their most recent transaction, many respondents reported lower than expected actual cost reductions  The average length of the outsourcing transaction from strategy to contract signature ranges Most Recent Outsourcing from 23 to 46 weeks in duration Experience 2012 Global Outsourcing and Insourcing Survey Summary.pptx  Respondents list underestimating scope by the vendor as the largest contributor to deal dissatisfaction and respondents use vendor communications and escalations most often to remedy deal dissatisfaction  Though often discussed and promoted, there continues to be a substantial amount of Cloud Sourcing uncertainty about cloud based outsourcing and its future adoption -3-
  • 4. About the survey
  • 5. 2012 Deloitte global outsourcing and insourcing survey respondents What are the revenues of your organization? What is your organizations primary industry sector? Education or Aerospace & Not-for-Profit, Defense, 3% 4% $500 million to Government, less than $1 4% billion Life Sciences & $25 billion or 11% more Health Care , $15 billion to Less than $500 5% Consumer & 19% Industrial less than $25 million billion 23% Products, 32% Transportation, 5% 5% $5 billion to less than $15 billion Energy, 9% 19% Conglomerate, Financial $1 billion to less 8% Services, Technology, than $5 billion Media, & 15% 23% Telecom, 15% What is the geographic reach of your organization? Respondent information  Survey respondents came from all industry sectors  70% of the respondents have global operations or operations in more than one geographic region 53%  62% of respondents were from three industries: consumer/industrial products, financial services, and technology/media/telecom 22% 2012 Global Outsourcing and Insourcing Survey Summary.pptx 17% 8%  43% of respondents are from organizations with $5B or Globally In more than one In the same Domestically more in annual revenues geographic region geographic region but not globallyAs used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legalstructure of Deloitte LLP and its subsidiaries -5-
  • 6. Current state of outsourcing and future outsourcing plans
  • 7. How does your company use outsourcing and offshoring? Is outsourcing a standard practice in your company? Does your company distinguish between outsourcing and offshoring? No, but considering it, 19% Yes, view decisions separately, No, view 46% decisions No, 21% Yes, 60% together, 54% The majority of respondents see outsourcing as a standard practice within their company and not a fad or trend Respondents are largely split as to whether their companies see the decision to offshore as distinct from the decision to outsource 2012 Global Outsourcing and Insourcing Survey Summary.pptx -7-
  • 8. Which option best describes your company’s current and future sourcing plan for thefollowing business functions? Information Technology 76% 81% Operations 42% 53% Finance 37% 53% Human Resources 30% 46% Legal 40% 42% Real Estate/Facilities 32% 41% Procurement 24% 36% Sales/Marketing Support 11% 24% Expected future outsourcingoutsourcing Currently uses increase in Currently uses outsourcing Expected future increase in outsourcing 2012 Global Outsourcing and Insourcing Survey Summary.pptx The expected future state of all business functions shows an increase in outsourcing. Human Resources and Finance are expecting the largest percentage increase in outsourcing activity Information Technology led all function categories with a combined 76% percent of respondents partially outsourcing the function. Outsourced Information Technology was also the function most contemplated for insourcing -8-
  • 9. For those business functions where you currently or plan to employ outsourcing,where does the majority of your outsourcing occur? Offshore Near Shore Information Technology 51% 70% Procurement 21% 24% Finance 41% 47% Human Resources 19% 22% Operations 39% 44% Finance 13% 18% Procurement 36% 34% Real Estate/Facilities 9% 19% Human Resources 14% 31% Information Technology 10% 15% Sales/Marketing Support 8% 29% Legal 5% 17% Legal 7% 13% Sales/Marketing Support 4% 19% Real Estate/Facilities 5% Operations 4% 9% 3% Currently uses outsourcing Expected future increase in outsourcing Expected future use of outsourcing Currently uses outsourcing Currently uses outsourcing Expected future increase in outsourcing Expected future use of outsourcing Currently uses outsourcing Respondents reported that for most business processes the majority of outsourced work does not leave the country. The exceptions are Information Technology, Finance, Procurement and Operations The least off-shored function is Real Estate/Facilities with respondents indicating that only 3% of outsourced work is being performed off-shore Near shoring continues to be the least used geographic delivery option 2012 Global Outsourcing and Insourcing Survey Summary.pptx Many respondents plan to increase near/offshore usage in their future outsourcing plans. The largest increases on a percentage basis are expected in Sales/Marketing Support (281%) Legal (150%) and Real Estate/Facilities (102%) No function is expecting to decrease the level of near/offshore usage in the future -9-
  • 10. Contract performance andrelationship management
  • 11. What factors/components do you feel are most critical to a successful outsourcingrelationship? A spirit of partnership between client and vendor 49% 15% Well engineered service level agreement 9% 34% Strong joint client/vendor governance of the agreement 15% 14% Consistent client and vendor communications 7% 10% Detailed contract terms and conditions 8% 9% A strong vendor account management team 5% 10% A strong internal vendor management team 6% 7% Very Important Important The ability to partner and clearly communicate expectations are the most important success factors to respondents 2012 Global Outsourcing and Insourcing Survey Summary.pptx Contracts and the joint client/vendor management team are generally seen as somewhat important, but ineffective without the other key components - 11 -
  • 12. How effective is your vendor management organization/function in meeting thefollowing objectives? Ensure invoicing accuracy 66% 31% 3% Perform necessary financial planning 58% 33% 9%Transactional Services Maintain an independent and unbiased approach to service providers 56% 37% 7% Proactively manage issues, risks and disputes 55% 34% 11% Ensure service providers’ adherence to commitments 55% 37% 8% Control scope through structured processes 54% 38% 8% Manage budgets and unknown costs 54% 43% 3% Manage successful completion of transition 51% 44% 4%Advisory Services Build vendor governance processes and controls 49% 42% 10% Effectively improve collaboration and reduce conflict of interest among service 43% 48% 9% providers Ensure improvement by implementing industry leading practices 41% 39% 20% Ensure service providers meet process improvement and innovation 32% 48% 20% expectations Effective Somewhat effective Not effective While most respondents believe their internal organizations are competent across all dimensions, several areas stand out for 2012 Global Outsourcing and Insourcing Survey Summary.pptx improvement Generally, vendor management organizations are viewed as being effective at “transactional services”, but fell short when it came more strategic, “advisory services” - 12 -
  • 13. How commonly are contracts terminated for cause or convenience? Have you ever terminated an outsourcing contract for cause or Which factors were most important in your decision to terminate the convenience? contract(s) early? Overall quality of service 71% Subject matter expertise 33% Pricing 33% No, 52% Yes, 48% Unsuccessful transition 29% Communication 28% Account management 20% Cultural fit 13% Almost half of respondents have terminated an outsourcing contract in the past 2012 Global Outsourcing and Insourcing Survey Summary.pptx Of the terminations, the perceived quality of service is the single biggest factor in the decision Culture and the ability to properly transition tends to be relatively unimportant to the decision to terminate - 13 -
  • 14. How effective was the contract termination? What was your post contract termination strategy? How satisfied are you post insourcing? Extremely Neutral, satisfied, 21 % 21% Move to another In-source, vendor, 66% 34% Satisfied, 58% How important were the following factors to your decision to insource after terminating the outsourcing contract? Improve customer service or 62% 38% customer experience Improve controls 15% 62% Reduce operating costs 15% 62% Access more flexible human 8% 69% resource models Desire to consolidate (assets, 15% 54% resources) 2012 Global Outsourcing and Insourcing Survey Summary.pptx What was your post contract termination strategy? Gain competitive advantage 8% 54%  Quality of service is key to informing the decision of Leverage new Technologies 54% whether to insource Gain tax advantages 38%  Almost all those who insourced are satisfied with the result Very Important Important - 14 -
  • 15. Most recent outsourcingexperience and outcome
  • 16. What was the value and duration of your most recent outsourcing contract, and didyou engage a third party to advise? What is the total contract value? What was the expected duration? Did you engage an advisor? 6 Years or more 18%Greater than $1 billion 2% We did not use third 56% party advisor(s) 5 Years 26% Between $501 million 2% and $1 billion 4 Years 6% Between $151 million 6% and $500 million 3 Years 24% Between $76 million 8% and $150 million 2 Years 13% We used a third party 44% advisor(s) Less than $75 million 82% Less than 2 Years 13% Most outsourcing contracts tend to be either for a 3 or 5 year term; this was independent of the type of service being sourced 2012 Global Outsourcing and Insourcing Survey Summary.pptx The overwhelming majority of contracts are relatively small (under $75 million), though, overall, contract size is closely correlated with company revenue Nearly half of all respondents used a third party advisor. Use of a third party advisor was higher for larger contracts - 16 -
  • 17. How much time did you spend on the following steps within the outsourcing processfor your most recent outsourcing effort? 20 18 16 14 Duration in Weeks 12 10 8 6 4 2 0 Strategic Business case Tax Request for Request for Vendor Contracting and Transition assessment development assessment Information Proposal selection negotiation planningPercent of respondents indicating 96% 93% 75% 83% 93% 96% 97% 96%they performed each step + 1 Std Dev - 1 Std Dev Average There is a wide variation in the amount of time spent on each step of the outsourcing procurement process, and many respondents 2012 Global Outsourcing and Insourcing Survey Summary.pptx skipped one or more steps of the outsourcing process There is no correlation between length of time spent on each step and size of deal* Standard deviation. Approximately 68% of responses fall within + or — one standard deviation of the mean - 17 -
  • 18. What were the objectives of your most recent outsourcing initiative? How important were each of these objectives in your most recent What were the anticipated and achieved cost reduction percentages as a outsourcing effort? result of your most recent outsourcing experience? Reduce operating costs 62% 25% Improve customer service 42% 31% Gain competitive 20% 29% advantage Gain tax advantages 20% 23%Leverage new technologies 17% 25% 37% 33% 29% Desire to consolidate 17% 25% 25% 19% 17% Access more flexible HR 11% 42% models 9% 10% 9% 1% 6% 4% Improve controls 10% 0% to 10% 11% to 20% 21% to 30% 31% to 40% Greater than Costs actually 4% 40% increased Very important Important Anticipated Achieved Reduce operating costs is chosen as very important by the most respondents, though this was followed by improve customer 2012 Global Outsourcing and Insourcing Survey Summary.pptx service, demonstrating there are more drivers to outsourcing than just cost reduction Overall, actual cost reductions through the most recent outsourcing experience are lower than expected with 53% of respondents anticipating significant savings (greater than 10% cost reduction), while only 42% experienced significant cost reductions - 18 -
  • 19. Did the most recent outsourcing experience live up to expectations? How satisfied are you with the outcome of your most What factors led you to be less than satisfied with your recent outsourcing initiative? most recent outsourcing initiative? Vendor underestimated scope/effort 52% Lack of service level attainment 48% Sub-par vendor performance 38% Lack of timely project/service 29% request execution Satisfied, Neutral, 16% Sub-par vendor resources 29% 69% Lack of business case attainment 24% Dissatisfied, 8% Attrition of key resources 24% Lack of vendor innovation 24% Extremely Lack of vendor knowledge of my 24% satisfied, 7% business Most respondents (76%) are either extremely satisfied or satisfied with their most recent outsourcing initiatives 2012 Global Outsourcing and Insourcing Survey Summary.pptx Underestimating scope is the most often reported problem with most recent deals followed by vendors being unable to meet service levels - 19 -
  • 20. How effective was the vendor transition? How long was the transition period for your most recent Did the transition negatively impact service delivery? outsourcing effort? Major business Less than 90 days 30% disruption, 5% 90 to 180 days 54% No business disruption, 181 to 270 days 8% 36% Minor business disruption, 271 to 365 days 5% 59% Greater than 365 days 3% Transition for the majority of respondents lasted between 90 and 180 days and was not correlated to the deal total contract value 2012 Global Outsourcing and Insourcing Survey Summary.pptx Business disruptions were reported by over half of respondents through the vast majority were described as minor disruptions - 20 -
  • 21. What actions are you currently taking to improve your satisfaction with your mostrecent outsourcing initiative? Increase communications across joint account team 57% Escalation to senior vendor personnel 38% Increase vendor management activities 33% Renegotiation 14% Legal action or arbitration 14% Seek help / advice from an independent advisor 14% Change service levels and/or service level weightings 14% Other 14% Provide training 10% Increasing account team communications is the most prevalent remedy for deals that have not attained a satisfactory rating from 2012 Global Outsourcing and Insourcing Survey Summary.pptx respondents followed by escalations to senior vendor personnel and increased vendor management activities Other category items include changing vendor personnel, re-analyzing the cost/benefit of outsourcing, and cancelling the contract - 21 -
  • 22. Cloud based outsourcing
  • 23. Is your company currently using cloud computing services? Yes, 30% No, 47% Don’t know, 23%How important were the following factors in your decision to use cloud Which cloud computing services have you implemented? computing services? Email & Messaging 43%Reduce capital 50% 35% spending Web Site Hosting / Maintenance 39% IT Infrastructure as a Service 32%Increase agility 42% 42% Front Office Systems 29% Reallocate 35% 27% resources Back Office Systems 29% Access to new Voice / Telephony Systems 18%technologies or 35% 35% services Middle Office Systems 14% Very important Important 2012 Global Outsourcing and Insourcing Survey Summary.pptx Thirty percent of respondents responded that their organizations have implemented cloud computing technologies Reduction in capital spending and increased agility were the most common reasons to move to the cloud There is no correlation between cloud computing adoption and organization size in the survey results - 23 -
  • 24. Opportunities and obstacles in cloud computing Is your company currently using cloud computing services? Yes, 30% No, 47% Don’t know, 23% Do you plan on using cloud computing within 3 years? Yes, 38% Don’t know, 56% No, 6% If no, why do you believe you will not use cloud computing? Cloud computing is too new of a concept for my 75% business Data privacy concerns 75% Security concerns 50% My business lacks the knowledge to implement 50% cloud computing The majority of respondents that currently do not use cloud computing technologies do not know if they will be utilizing cloud 2012 Global Outsourcing and Insourcing Survey Summary.pptx computing in three years - 24 -
  • 25. Global outsourcing advisory contactsMarc Mancher Stef Oud Katty Cardenas Mike WillemseDeloitte Consulting LLP Deloitte Consulting BV Deloitte & Touche Ecuador Deloitte Consulting (Pty) LtdStamford, U.S.A. Eindhoven, Netherlands Cia. Ltda. Johannesburg, South Africa Quito, Ecuador +27 82 573 5866+1 860 488 5071 +31 8 8288 1806jmancher@deloitte.com soud@deloitte.nl +593 2 381 5100 mwillemse@deloitte.co.za kcardenas@deloitte.comMichael Gretczko Peter Ratzer Peter BartaDeloitte Consulting LLP Deloitte Consulting GmbH Soledad Ruilopez Deloitte Touche TohmatsuNew York, U.S.A. Munich, Germany Deloitte & Co. S.R.L. Melbourne, Australia Buenos Aires, Argentina +61 3 9671 6699+1 212 618 4377 +49 89 29036 7970mgretczko@deloitte.com pratzer@deloitte.de +54 11 4320 2700 pbarta@deloitte.com.au sruilopez@deloitte.comPeter Lowes Nicholas Davies John BellDeloitte Consulting LLP Deloitte Consulting AG Liliana Santos DeloitteNew York, U.S.A. Zurich, Switzerland Deloitte S.C. Auckland, New Zealand Montevideo, Uruguay +64 9 303 0853+1 212 618 4380 +41 44 421 6810plowes@deloitte.com nidavies@deloitte.ch +598 2 916 0756 jobell@deloitte.co.nz mariasantos@deloitte.comColleen Gordon Thomas Andersen Koji MiwaDeloitte Inc. Deloitte Consulting Roberta Yoshida Deloitte TohmatsuToronto, Canada Copenhagen, Denmark Deloitte Touche Tohmatsu Consulting Co., Ltd. Consultores LTDA Tokyo, Japan+1 416 601 6739 +45 2220 – 2752 Sao Paulo, Brazil +81 80 4359 3273cogordon@deloitte.ca thoandersen@deloitte.dk +55 11 5186 1108 kmiwa@tohmatsu.co.jpGuillermo Moran Philippe Rassek royoshida@deloitte.com 2012 Global Outsourcing and Insourcing Survey Summary.pptxGalaz, Yamazaki, Ruiz Deloitte Consulting FranceUrquiza , S.C. Paris, France Neville HowardMexico City, Mexico Deloitte MCS Limited +33 6 7945 4923 London, United Kingdom+52 55 5080 6210 prassek@deloitte.frgumoran@deloittemx.com +44 20 7303 7252 nhoward@deloitte.co.uk - 25 -
  • 26. Ancillary data page The survey had 111 respondents Respondent companies represented 22 primary industries The median revenue of respondents was between $1 billion and $5 billion The median approximate number of employees for respondents was 7,000 Respondents were located in 23 different countries with representation for every major geographic region 2012 Global Outsourcing and Insourcing Survey Summary.pptx - 26 -
  • 27. This presentation contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte isnot, by means of this presentation, rendering business, financial, investment, or other professional advice or services. Thispresentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action thatmay affect your business. Before making any decision or taking any action that may affect your business, you should consult aqualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any personwho relies on this presentation.
  • 28. Copyright © 2012 Deloitte Development LLC. All rights reserved.

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