2. Outsourcing has never been the same
as offshoring, yet it seems the two
concepts have become increasingly
interchangeable over the past decade.
/02
Despite the long history of outsourcers as
leaders in innovation and in delivering
practical workforce management solutions,
offshoring has increasingly stolen the spotlight
and thunder (and not always in positive ways).
3. Introduction /03
Offshoring continues to be seen by some as a necessary evil.
Yet, our ongoing partnerships and candid conversations with leading organizations and
corporate clients around the world are showing encouraging signs that the outsourcing
conversation is maturing. Instead of a choice between expensive local consultants and
cheaper offshore labor, it has become apparent we need more than just these two
operational models to run the businesses of tomorrow.
Outsourcing, in all its forms, is rapidly reshaping work as we know it, and at the same
time, the economies of both developed and emerging nations.
Here are our top six trends in outsourcing for 2013/14.
We hope you join the conversation.
4. /04
80% of customers today have been
outsourcing for more than 10 years
IAOP survey
6. It’s no longer primarily about cost /06
Entire economies have been built on the outsourcing wave,
and by all measures, the quality and efficiency of such services
have greatly improved.
It is now clear that emerging nations have cornered the market for low-cost, scalable
capabilities in some business-critical areas. As a result, many businesses are now
forced to justify why they are not outsourcing at least some aspects of their business
processes, instead of defending why they are. Keeping some capabilities within high-cost,
developed economies can now appear like the less innovative and even less logical
option. Outsourcing has become, for all large organizations, part of doing business.
However, cost-savings are no longer the primary reason for organizations—large and
small—to consider outsourcing. Often ahead of price, these three issues are central to
the decision to outsource, and sometimes to offshore:
1. Competitive agility: the ability to respond quickly to new contractual needs,
new opportunities and changing market conditions.
2. Scalability: the need to better manage unforeseen and seasonal demand
and access just-in-time talent.
7. It’s no longer primarily about cost /07
3. Innovation: investment in critical research and development, and the ability
to access high-demand, low-supply talent in order to deliver innovative
products and services in a timely way.
Those organizations that have moved some of their business processes offshore say they
are “more flexible and agile, and [are] better able to adapt to competition in challenging
economic environments”1.
A recent International Association of Outsourcing Professionals (IAOP) survey also
demonstrated that 80% of customers outsource to improve business performance
and their overall operating model—price is not the primary factor even if it is an
ancillary benefit.
The other key reason that offshoring efforts are no longer primarily focused on cost-savings
is simply that it is not always cheaper to offshore, hence trend number two.
1 http://www.fuqua.duke.edu/news_events/news-releases/offshoring-jan-2012/#.UdpHoM0ZSZM
80% of customers
outsource to improve
business performance
and their overall
operating model—
price is not the
primary factor
even if it is an
ancillary benefit.
9. Near-shoring is becoming more prevalent /09
“Near-shoring” is gathering pace within higher cost, high-talent
labor markets as outsourcing moves into strategic activities.
The shift away from the belief that “cheaper is better” is already taking root in the
United States and other developed economies for which quality is again the crucial
differentiator. In fact, an HfS Research survey shows that the US is currently seen as the
world’s most desirable region to expand IT, with more service delivery centers being
added over the next two years. As many routine IT tasks becomes automated, and the
incremental benefits from labor arbitrage are diminishing, the global labor pool for IT
outsourcing will continue to shrink.
As the talent pool becomes smaller and more expensive, and routine tasks are
undertaken by machines instead of people, the demand for more highly skilled
individuals rises. This further diminishes the prospect of outsourcing these tasks to
significantly lower-cost labor markets. In fact, IT outsourcing contracts dropped a full
20% from 2011 to 2012, and a recent Gartner report says that the combination of these
factors will result in outsourcing of IT services overseas dropping by at least 15% through
to 2016.
20% reduction
2012
2011
IT outsourcing contracts
dropped a full 20%
from 2011 to 2012
and outsourcing of IT
services overseas may
drop by at least 15%
through to 2016.
10. Near-shoring is becoming more prevalent /10
Over time, clients have become acutely aware that customers in developed economies
may desire lower prices, but they will rarely accept lower standards of service along with
it. A better compromise in some instances is to near-shore to hubs of specific talent and
expertise. As such, companies are now seeking near-shore outsourced solutions where
costs may be contained, but where high-quality talent can be found, and where fewer
logistical, cultural and language barriers exist.
For the US, options in Central and South America, Mexico and Canada will continue to
be attractive business process outsourcing destinations into the near future, particularly
as rankings around labor productivity growth, infrastructure spending, post-secondary
education enrollment, and broadband access dramatically improve in developing Central
and South American countries.
Alongside this, employers seem to be indicating that more centralized control of capital
with improved touchpoints is what they are seeking. Insourcing and near-shoring of
projects or programs, especially for more strategic work, allow for more customized
solutions that better integrate into an organization’s culture and provide the transparency
they desire.
12. /12
OUTSOURCING IS INCREASINGLY applied by function
Efficiencies found in early applications of outsourcing have also
transferred to lower-volume, higher-touch functions.
Outsourcing has steadily assimilated more and more complex, strategic functions—and
many that provide expertise by industry, process, regulatory oversight, or job function.
Today, outsourcing solutions are often customized by industry or organizational vertical,
e.g. FAO, CRO, RPO, CWO, and HRO. Last year, the BPO market alone grew by 12%.
Within the US, outsourced services, both new and renewal, total some $1bn annually.
And, an HfS survey has anticipated the BPO services market to grow at 5.1% in 2013,
and 6.0% CAGR to 2017. Financial/accounting and HR outsourcing were the two fastest
growing areas, as existing clients expanded scope and services. The CRM market is
expected to grow more rapidly in 2014 as clients buy more value-added services around
social media and analytics.
In a 2012 survey by Deloitte, of those companies that use outsourcing:
• 76% reported to
currently outsource
some aspect of IT;
81% predict future
IT outsourcing.
• 30% currently outsource
HR functions, and
46% predict outsourcing
in the future.
• 37% reported currently
outsourcing accounting/
finance space and
53% expect to do so
in the future.
13. /13
OUTSOURCING IS INCREASINGLY applied by function
The general value proposition of outsourced models has evolved steadily to apply to
more strategic functions, and both hard and soft savings can be realized in these more
complex areas.
If business process outsourcing is to successfully make the transition from only non-core
and non-strategic functions to include strategic ones, it requires a different operating
methodology that incorporates more of a partnership with the client organizations. From
tighter integration, clients will have better transparency to influence outcomes. This
insight and collaboration should help to drive more seamless service, improved business
continuity, and better on-going communications in outsourced workforce solutions.
See following diagram
14. /14
Business processes and deliverables
HISTORICAL PRESENT DAY
OUTSOURCED OUTSOURCED
non-core/
non-strategic
non-core/non-strategic
non-core/strategic
INTERNAL INTERNAL
core/strategic core/strategic
16. /16
Outsourcing is expanding among mid-sized operators
Smaller organizations may stand to gain more from outsourcing
than larger ones.
Some 73% of mid-size companies report plans to expand existing offshore business
processes over the next 18–36 months, compared to 55% of respondents to the same
question a year earlier.
Conversely, just 41% of larger companies are planning to expand their offshoring of
business processes in the same period, down from 52% in the previous year. And, it
appears smaller organizations can find the outsourcing journey more useful and effective.
According to a survey of 277 outsourcers by analyst firm HfS Research and the London
School of Economics, 63% of mid-market buyers said their outsourcing initiatives had been
very successful at reducing costs. This compares to 44% of large companies. In addition,
the following points were revealed:
• Some 42% of mid-market buyers said their deals were very effective in meeting
compliance and regulatory requirements, compared with 30% of large companies; and
• 33% said outsourcing had given them more effective global operations, compared
to 18% of large companies.2
2 http://www.cio.com/article/689037/IT_Outsourcing_What_Big_Companies_Can_Learn_from_Midsize_Companies
3 http://www.smh.com.au/business/momentum/outsourcing-to-grow-20121011-27ee8.html#ixzz2YoXRGuY2
$US147 B
2010
$US191 B
2015
The International
Data Corporation
(IDC) forecasts global
revenues for business
process outsourcing to
rise from $US147 billion
in 2010 to $US191 billion
in 20153.
18. Outsourcers and clients are in direct competition for talent /18
As outsourced work becomes more strategic and of higher value,
more talented workers want to do it.
Cutbacks over the past five years in many industries have done two things. They have:
• left management wearing more hats and doing more with less, and
• driven more people into contract work.
As a result, the flexibility and expertise offered by outsourced talent is becoming a
self-reinforcing cycle. As more work has been made available in this way, the more
attractive (i.e. reliable and interesting) it has become to talented workers. And, as full-time
positions have become less secure, more stressful and have enabled fewer training
opportunities and less support, talent is increasingly finding these things in the contract/
outsourcing environment instead.
As outsourced work moves away from the non-strategic, non-core space into higher
value, strategic tasks, people with highly specialized skills that are in high demand will
have even greater incentives for taking on flexible contract roles. So, when organizations
compete for this kind of talent, increasingly they are doing so in direct competition with
19. /19
Outsourcers and clients are in direct competition for talent
outsourcers of all sizes. Client companies are also competing for this kind of
talent without the perceived benefits of a permanent role on their side anymore.
This can make it difficult for some organizations to fill critical roles on a permanent full-time
basis, particularly for roles requiring those specialist technical skills that are already
in high demand.
As the benefits of working in a permanent role diminish and the quality of contract roles
increases, access to talent will become more about offering the employment terms
(often flexible ones) that the talent is looking for, rather than simply selling the desired
employee a job.
21. Structures and processes are becoming more formal /21
Since the turn of the 21st century, the outsourcing industry has
steadily become more formalized.
Today, a vast number of leading professional associations, for both organizations and
individuals, are involved in transforming the world of business through outsourcing, off-shoring,
and shared or managed services.
This trend will only help to improve consistency around all components of outsourced
solutions as the industry moves forward. It will also continue to provide for better
governance of relationships between outsourcing providers and clients.
Consider for example, expanding organizations such as the International Association
of Outsourcing Professionals (IAOP®)—a global, standard-setting advocate for the
outsourcing profession, boasting a global community of more than 120,000 members
and affiliates worldwide. Roughly 85% of its members credit the IAOP for improved
outsourcing outcomes at their organizations, while 93% of the IAOP Certified
Outsourcing Professionals® (COPs) surveyed report that the designation has had a
positive impact on their careers.
93% of the IAOP
Certified Outsourcing
Professionals® (COPs)
surveyed report that
the designation has
had a positive impact
on their careers.
22. Structures and processes are becoming more formal /22
The Outsourcing Institute (OI), a neutral professional association dedicated solely to
outsourcing since 1993, offers free membership to a global network of more than 70,000
executives, practitioners, and experts across the industry. There are also other tools and
networks that are making it easier and more efficient for outsourcers to contribute to
industry-wide discussion and demonstrate thought leadership. The Shared Service and
Outsourcing Network (www.ssonetwork.com) is just one example, but there are many.
A more formalized structure and set of expectations across the industry will further
establish common standards for measurement, and key indicators to help monitor
the performance of processes and the overall levels of any provider’s suite of services.
Ultimately, this is a very positive trend, which reflects the ongoing success of many
outsourced relationships, and will otherwise serve as the basic foundation for best
practices and many innovations to come.
23. Refceeenrs: /23
1. http://www.fuqua.duke.edu/news_events/news-releases/offshoring-jan-2012/#.UdpHoM0ZSZM
2. http://www.iaop.org/; 6/2013
3. “Assessing Sourcing Operational Effectiveness and Maturity,” Duke University FUQUA ORN; 2/2013
4. http://www.outsourcingintelligencenetwork.com/; 6/2013
5. http://www.americanstaffing.net/; 6/2013
6. “IT Services and BPO Market Size and Forecast, 2013–2017,” HfS Research; 2/2013
7. “Unlocking the Value of Outsourcing: A Global Economist’s View,” CBRE; 2/20-13
8. “Choosing the Right Processes to Outsource,” Pactera; 2/2013
9. “2012 State of IT Outsourcing,” InformationWeek; 09/2012
10. “CIOs to Accelerate Outsourcing in 2013,” Bluewolf; 08/29/2012
11. “10 Business Process Outsourcing Trends to Watch in 2012,” Datamark; 12/01/2011
12. “10 Business Process Outsourcing Trends to Watch in 2013,” Datamark; 01/03/2013
13. “The Death Of Outsourcing, and Other IT Management Trends,” Forbes; 12/28/2012
14. “A Dozen IT Predictions For 2013 and Beyond,” Gartner; 10/24/2012
15. “Outsourcing, Today and Tomorrow: Insights from Deloitte’s 2012 Global Outsourcing and Insourcing Survey,” Deloitte; 5/2013
16. “State of the Outsourcing Marketplace 2013,” Sylvan Advisory; 1/2013
17. “Outsourcing’s Global Value: A Panel Discussion,” IAOP 2013 Outsourcing World Summit; 2/2013
18. “Is Good Enough Really Good Enough? The Great Talent Paradox in Outsourcing,” HfS; 4/2013
24. EXIT
For more thought leadership go to talentproject.com
About the author
Dominic J. Asta is Vice President and Americas Practice Leader and is responsible for
strategy, brand relationship management, and business development support for the
Business Process O utsourcing practice of KellyOC G in the Americas. Prior to joining KellyOC G
in 2008, he held global leadership positions in finance and accounting, procurement, sales,
and business development. He holds a bachelor’s degree in management from the University
of M ichigan-Dearborn. He is also a C ertified O utsourcing Professional (CO P) with the I nternational Association of
Outsourcing Professionals (IAOP).
About KellyOCG
KellyOCG® is the Outsourcing and Consulting Group of workforce solutions provider Kelly Services, Inc. KellyOCG is a
global leader in innovative talent management solutions in the areas of Recruitment Process Outsourcing (RPO), Business
Process Outsourcing (BPO), Contingent Workforce Outsourcing (CWO), including Independent Contractor Solutions,
Human Resources Consulting, Career Transition and Executive Coaching, and Executive Search.
KellyOCG was named in the International Association of Outsourcing Professionals® 2013 Global
Outsourcing 100® list, an annual ranking of the world’s best outsourcing service providers and advisors.
Further information about KellyOCG may be found at kellyocg.com.
