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BUSINESS OUTSOURCING
ȖȖ Scott Tibbles is the entrepre-
neur behind SmartCam Direct
whichsellsdashboardcamerasfor
cars. These are the ideal gizmos to
record journeys for security and
insurance purposes
When Scott founded the firm
in 2011 he managed everything
himself, including the packag-
ing and mailing of the cameras.
Big mistake.
“It was an extremely time-
consuming part of the process,”
he says. “Looking back, I spent
an awful lot of time in queues at
the Post Office. And it was very
frustrating because there were
far more valuable ways to use
my time.”
So Scott outsourced. He hired
P2P e-Logistics to take care of
warehousing, distribution, invoic-
ing and account management.
“The whole thing requires mini-
mal effort on my part,” he says.
Since the arrangement sales are
up 64 per cent, and Scott is free to
focus entirely on the important
bits of his business, marketing
and product testing.
The story is a great advert for
outsourcing. In truth there is an
abundance of inspiring stories in
this sector. It’s an industry with
a spring in its step. The UK out-
sourcing market is already worth
£207 billion or 8 per cent of gross
domestic product, according to
Oxford Economics. That’s 10 per
cent of the nation’s workforce.
As the industry matures the
examples of outstanding out-
sourcing grow more impressive.
Take Nisa, the convenience
retail chain. It has 4,000 stores
with sales in excess of £1.5 bil-
lion. It moves 108 million cases
a year. Yet the entire Nisa logis-
tics department consists of just
two people. Two! The operation
has been completely outsourced
to DHL.
One half of the two-man team
is Jon Stowe, Nisa’s distribution
director. He says there is a long
list of reasons why Nisa out-
sources rather than managing
everything in-house. “For start-
ers, it would not give us value for
money to do so,” he insists.
But there is also an environ-
mental benefit. “DHL has a
recycling division, Envirosolu-
tions, which recycles plastic and
cardboard for us. That is part of
their service.”
Nisa benefits from liaising with
DHL’s other customers, through
vehicle sharing, for example. An
arrangement with JD Wether-
spoon in rural Scotland means
Nisa’s vehicles carry both firms’
goods, generating revenue for
Nisa. Deliveries in the South East
are shared with BP garages.
Mr Stowe emphasises the other
services DHL bundles in with its
service, such as benchmarking,
helping Nisa hit carbon-reduc-
tion goals, and consulting on
Nisa’s operational efficiency. “It
is a really deep partnership,” he
says. “You really can’t think of it
as merely us accessing a service.”
Stories like this ought to add
some much-needed lustre to out-
sourcing’s image. Repeated stud-
ies suggest there is a wariness
surrounding outsourcing, in both
the minds of the general public
and in senior professionals.
A National Outsourcing Asso-
ciation (NOA) poll suggests 80 per
cent of the public “do not think
outsourcing is beneficial to UK
plc”. A poll by SKS and Loughbor-
ough University found 70 per cent
of chief finance officers in small
and medium-sized firms thought
that offshoring or outsourcing
financial work to another country
was not acceptable.
The NOA’s response has been
to launch an Outsourcing Works
campaign, which uses real-world
case studies to prove the repeated
success of outsourcing. There are
few common themes.
Capital costs are slashed. When
Dariush Zand set up mobile net-
work Ovivo he outsourced the
contact centre operation because
he simply lacked the money to
build and run his own centre.
Access to expertise becomes
simple. Flooring firm Har-
vey Maria outsources its IT
operation to NetSuite. Founder
Mark Findlay relies on Net-
Suite to install and maintain his
accounting, billing, customer
relationship management and
e-commerce functions, special-
isms he would have struggled to
manage himself.
Outsourcing offers flexibility in
terms of capacity. Travel opera-
tor Thomas Cook uses Accenture
to handle its accounts and back-
office processes, knowing that
Accenture has vast resources at
its disposal to handle any volume
or work.
Also outsourcing can be
greener. When the National
Trust handed over its data centre
operation to IT services pro-
vider Adapt, it measured a fall
in power consumption of 70 per
cent attributable to Adapt’s use
of server virtualisation and supe-
rior physical infrastructure. And
since Adapt uses biomass power,
generated by woodchip and fibre
fuel, there is a further saving in
carbon emissions.
In addition outsourcing saves
money; sometimes, a huge sum
of money. London Underground
outsourced its disputes resolu-
tion to specialist agency CMP
Resolutions. With 12,000 staff
working under difficult condi-
tions, London Underground
was dogged by a painfully high
dispute rate. CMP Resolutions
introduced new processes, pro-
vided superior mediation and
handled paperwork far quicker
than London Underground could
manage internally.
There has been a reduction
of 75 per cent in bullying and
harassment cases, and Alexan-
dra Bode-Tunji, senior business
partner at London Underground,
estimates a saving of £3 million
over a four-year period.
These are the stories the indus-
try needs to shout about. Out-
sourcing has its doubters. Stories
such as these ought to ensure
outsourcing gets the recognition
and support it deserves.
Casestudiesrevealpositivesuccessstorieswhichbelieoutsourcing’s
negativepublicimage,asCharlesOrton-Jonesreports
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MORETHANMERELY
ACCESSINGASERVICE
Storiessuchastheseoughtto
ensureoutsourcinggetsthe
recognitionandsupportitdeserves
Outsourcingathome
andabroadcanhelp
growbusinessaswell
ascutcosts
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Charles Orton-Jones
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Managing Editor
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Business journalist and web editor at Management
Today, she was deputy editor at Smarta and online
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Former Professional Publishers Association
Business Journalist of the Year, he was editor-at-
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editorofTheTreasurer,theofficialmagazineofthe
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Freelancebusinessjournalist,shecontributes
regularlytovariousnationalmediaandtradepress,
coveringeconomictrends,professionalpractices
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04
Savingsofmorethan20percent,overthe
in-housemodel,areroutinelyachieved
Expertise,convenienceandcapacity
areallreasonsforoutsourcing,but
CharlesOrton-Joneslooksatanother,
perhapsmoresignificant,driver–cost
IT’STHEECONOMY,
DUMMY…
SAVINGCASHISA
MATTEROFFACT
ȖȖ Howmuchdoesabusinessreally
savebyoutsourcing?Let’sstartwith
one of the most commonly out-
sourcedservices–data inputting.
Checkatrade.com hosts profiles
ofcompaniesinthebuildingtrade,
so customers can avoid cowboy
builders. With 9,200 members,
Checkatrade has 100 staff and a
turnoverofmorethan£6.8million,
soitneedsalotofdatainputting.
Founder Kevin Byrne has out-
sourced the work to Serbia. And
how much does he save? Mr Byrne
reckons it would cost £19,000 per
employee in the UK and salaries in
Serbiaarecheaper,sothere’sa5per
cent saving straight off the bat. But
employing staff in the UK comes
with a string of other costs. Mr
Byrne lists sick pay (£395), holiday
pay (£1,462), national insurance
contributions(£2,090),officespace
(£1,250), bonuses and incentives
(£2,000) – none of which he pays
because he has outsourced the
work. This is a saving of £8,147 per
workerormorethan40percentoff.
Another meat-and-potatoes
segment of outsourcing is data
hosting. When Slough Borough
Council was forced to move out of
its elegant, but ancient, town hall
buildingtomakeroomforaschool,
IT boss Simon Pallett was forced
tochoosewhethertokeephisdata
centre in-house or to outsource.
He decided to outsource, giving
the £30,000-a-month contract to
managedhostingspecialistSavvis.
“The costs of building our own
data centre were so colossal the
council couldn’t even meet the
capital requirement,” he recalls.
There were other savings too.
“Running a server room means
big air conditioning costs. In our
old town hall building, where
we’d previously had our servers,
the cooling was a nightmare.
Sometimes we’d be called up in
the middle of the night because
a server had overheated, and
someone had to get out of bed and
go to the town hall to switch it off.
Outsourcing removes all of that.
“Staff costs are lowered because
our IT team can concentrate on
doing their jobs instead of main-
tainingthe servers. The electricity
costs are lower too.”
Canhequantifythetotalsaving?
“Actually,althoughweknowwe’ve
saved money, it is hard to provide
an exact figure because we previ-
ously couldn’t quantify our costs.
Different parts of the system were
paid for by different departments,
so there was no overall cost fig-
ure. Now, because we have one
partner, Savvis, we can record
and control exactly what we are
spending. And there are no more
midnight call-outs.”
But what about outsourcing
something really tricky? Notting-
ham University is as awkward as
they come from an IT perspective.
There are 7,000 staff and 34,000
students, all of whom need access
to printers. Until recently the
solution was a mess. Each staff
member had their own printer on
theirdesk.Everymakeanddesign,
frominkjettolaser,colourtoblack
and white, large to small, ancient
tomodern,waspresentoncampus.
Head of procurement Jim Reed
had the job of cutting costs, and
his solution was to remove every
single printer and replace them
with large multi-functional print-
ers provided by Xerox. “We have a
£9.2-million contract with Xerox
over five years. The business case
says we’ll save at least 20 per cent
by outsourcing, maybe as much as
25 per cent,” he says.
Mr Reed rattles out the savings:
“The new printers are industrial
units, so the ink is cheaper. They
have better power management,
as they power down when not in
use cutting electricity costs by 30
per cent. The default is printing to
black and white on double sides,
saving ink costs and paper costs.”
Importantly the new system is
more convenient too. “The Xerox
system means you can print to
any printer from any device. You
can be on the bus, send a job, then
arrive later at the printer, swipe
your card and collect the job.
This has been a really popular
improvement,” he says.
The National Health Service is
one of the most contentious areas
of outsourcing. Activists argue
that the NHS is being privatised
bystealthasoutsourcerstakeover
more and more functions.
Those in favour can point to
examples, such as Mid Essex Hos-
pital Services NHS Trust, which
last year employed supply chain
management consultant Inverto
to find savings. The goal was to
save £3 million out of £32 million
expenditure. So far £1.1 million
has been saved, with £2.3 million
projected this year.
How? One trick was to get sup-
pliers more involved in the sales
process. This led to traditional
tympanic thermometers being
replaced with infra-red devices,
saving £50,000, and the introduc-
tion of easy-to-clean mattresses, a
67 per cent cost saving.
Crucially, Inverto did the oppo-
site to what is sometimes alleged
by critics of NHS outsourcing –
they put clinical staff at the heart
of procurement. In orthopaedic,
a £3-million department, the
procurement team included a
consultant, lead nurse, theatre
ordering technician and procure-
ment consultants, who reported
at weekly meetings to the clinical
director, chief operating officer
and chief financial officer.
Bill Martin, the consultant
orthopaedic surgeon involved,
says: “An initial worry that finan-
cial pressures would lead us
towards accepting sub-standard
implants or major inventory
changes has not been borne out.
It was reassuring to be involved in
the process as a surgeon.”
These are just a few case studies,
but two lessons stand out. First,
that calculating savings needs
to take into account a long list of
items, including often-forgotten
issues such as electricity and the
amount of time senior manage-
ment spend dealing with relevant
issues. And second, that savings
of more than 20 per cent, over
the in-house model, are routinely
achieved on a continuing basis.
Collectively this evidence sug-
gests that on cost alone, without
even factoring in the no less
relevant triumvirate of expertise,
convenienceandcapacity,thecase
foroutsourcingcanbepowerful.
COST
Knowingthe
correctbusiness
protocol
Page 10
Miles
cost

05theraconteur.co.uk twitter.com/raconteurmedia
05theraconteur.co.uk twitter.com/raconteurmedia 5
COMMERCIAL FEATURE
Innovationisatwo-waystreet
inaBPMrelationship
In a QA, Keshav R. Murugesh, group chief executive of WNS Global Services,
discusses innovation in a business process management (BPM) context
Every client talks about “innova-
tion” as the key area of focus in an
outsourcingengagement.However,
very few say they actually see it in
their relationship with the provider.
Whyisinnovationsodifficult?
The conventional definition of inno-
vation may not fit into a BPM con-
text. If buyers are looking for “dis-
ruptive” innovation, it may not
happen at a regular interval like in
the case of Google or Apple. This is
not to say that disruptive innovation
isimpossibleinaBPMcontext,butit
willbefarandfewinbetween.
Innovation in a BPM environment
is more a two-way street, actually.
If the engagement model is around
partnership, then innovation is more
likely to happen. Providers and cli-
ents have to engage in a relationship
that has matured far beyond the
“vendor-buyer” construct. There
are also innovations that may seem
very risky at the start of a relation-
ship, more so when non-linear
models are proposed. The engage-
ment maturity guides the innovation
inaBPMcontext.
I would equate innovation in a BPM
context as viewing the hour-hand of
a clock; it does not move if you keep
looking at it. It’s only after a point of
timethatyouseeithasmoved.
Howdoyoudefineinnovation?
I see it in a few forms in our industry:
a completely new disruptive business
idea; completely new high-impact
business outcome, possibly creating
a new revenue stream for the client;
a dramatic idea that changes the way
our client engages or interacts with
itsend-customer;orevenanideathat
can change the steer of the client’s
organisation internally. All these, for
me,areinnovations.
What do buyers do to help or hin-
der the changes you want to make
thatleadtoinnovation?
Innovation should be an “aspiration”
for both sides. The provider and cli-
ent must partner with each other
to create something truly worthy of
recounting or partaking in the out-
come. It definitely cannot be what
I call the “tick-the-box” approach.
It cannot be led by service-level
agreements (SLAs) where a pro-
vider is under pressure to show
innovation because it is part of a
quarterly review. Hence, the earlier
pointsImadearoundsharingarela-
tionship of equals and partnering
is far more conducive to the buyer-
providerconstruct.
Clients can help innovations by
asking questions that can spur it.
For instance, what more can I drive
into my process to make the out-
come more dramatic? What kind of
analytics can change the way I work
in one of my processes? How will
I be able to generate a completely
new revenue stream with my exist-
ingsalesandmarketingforce?
How do you go about the process?
Anybenchmarks?
Reducing headcount on a par-
ticular project would prima facie
seem like a great way to improve
efficiency and reduce cost on the
project. But that may not always
be an incentive for the provider
and its staff to innovate. Instead
gain-sharing, productivity and out-
come-based benchmarks are bet-
ter methods to innovate.
Providers should nurture a cli-
mate of innovation and motivate
the staff by including contractual
incentives. Providers should also
work towards creating leaders that
motivate the staff and inspire them
to work towards measurable inno-
vation-centricprojects.
Providersandclientshavetoengage
inarelationshipthathasmaturedfar
beyondthe‘vendor-buyer’construct
Inspired to outsource? In need
of reviewing your existing rela-
tionships? Whether you are new
to outsourcing or a veteran in
need of some focused analysis,
a conference in London next
month could help businesses
from all sectors.
The Gartner Outsourcing
Strategic Partnerships Summit
promises to deliver practical
guidance and strategic advice
on outsourcing and IT services.
The September 9-10 confer-
ence focuses on rethinking
sourcing strategies and devel-
oping best practices.
“The truth is that almost all
firms will need to consider
the issues on the summit’s
agenda,” says Gartner. “Dis-
ruptive forces – social, mobile,
information and cloud – have
created a new imperative for
organisations’ sourcing strate-
gies to evolve.
“What does that mean for you
– assessing new products and
services, selecting new vendors,
adapting evolving delivery
options and new pricing models,
addressing a host of geographic
opportunities, and optimising
the vendor ecosystem?
“Attending this conference
will help you to make informed
sourcing decisions based on the
latest industry thought-leader-
ship and best practices.”
The agenda is designed for
key sourcing roles:
Track A – Chief information
officers and senior leaders:
Growing and succeeding in a
digital world
Track B – Sourcing and
contract managers: Selecting,
evaluating and contracting for
optimal deals
Track C – IT vendor manag-
ers: Optimise your IT vendor
ecosystem
Track D: Activating the next
generation enterprise with cloud
and industrialised services
Track E: Workshops, roundta-
bles and networking.
To view the full agenda
and register, visit
gartner.com/eu/
outsourcing
OUTSOURCINGAND
STRATEGICPARTNERSHIPS
SUMMIT
£ £5m
savingsfromLondonFire
Brigade’sten-yearcontractwith
Capitatorunits999service
Source: Financial Times
$ $50k
paidbyUScomputerprogrammer
AndrewValentine,whoearned
$250,000,tosecretlyoutsource
hisownjobtoChina
Source: The Telegraph
offirmsusing
outsourcingcitecostas
thenumber-onereason
Source: IBM
27%
10.7%
projectedsalary
increasesinIndiafor2013
Source: Aon
50%
ofcouncilsoutsourcerubbish
collectiontocutcosts
Source: Local Government Association
71%
ofchiefinformation
officersarefrustratedby
hiddencostsofmainframe
computeroutsourcing
Source: Compuware Corporation
COMMERCIAL FEATURE
Innovationisatwo-waystreet
inaBPMrelationship
In a QA, Keshav R. Murugesh, group chief executive of WNS Global Services,
discusses innovation in a business process management (BPM) context
Every client talks about “innova-
tion” as the key area of focus in an
outsourcingengagement.However,
very few say they actually see it in
their relationship with the provider.
Whyisinnovationsodifficult?
The conventional definition of inno-
vation may not fit into a BPM con-
text. If buyers are looking for “dis-
ruptive” innovation, it may not
happen at a regular interval like in
the case of Google or Apple. This is
not to say that disruptive innovation
isimpossibleinaBPMcontext,butit
willbefarandfewinbetween.
Innovation in a BPM environment
is more a two-way street, actually.
If the engagement model is around
partnership, then innovation is more
likely to happen. Providers and cli-
ents have to engage in a relationship
that has matured far beyond the
“vendor-buyer” construct. There
are also innovations that may seem
very risky at the start of a relation-
ship, more so when non-linear
models are proposed. The engage-
ment maturity guides the innovation
inaBPMcontext.
I would equate innovation in a BPM
context as viewing the hour-hand of
a clock; it does not move if you keep
looking at it. It’s only after a point of
timethatyouseeithasmoved.
Howdoyoudefineinnovation?
I see it in a few forms in our industry:
a completely new disruptive business
idea; completely new high-impact
business outcome, possibly creating
a new revenue stream for the client;
a dramatic idea that changes the way
our client engages or interacts with
itsend-customer;orevenanideathat
can change the steer of the client’s
organisation internally. All these, for
me,areinnovations.
What do buyers do to help or hin-
der the changes you want to make
thatleadtoinnovation?
Innovation should be an “aspiration”
for both sides. The provider and cli-
ent must partner with each other
to create something truly worthy of
recounting or partaking in the out-
come. It definitely cannot be what
I call the “tick-the-box” approach.
It cannot be led by service-level
agreements (SLAs) where a pro-
vider is under pressure to show
innovation because it is part of a
quarterly review. Hence, the earlier
pointsImadearoundsharingarela-
tionship of equals and partnering
is far more conducive to the buyer-
providerconstruct.
Clients can help innovations by
asking questions that can spur it.
For instance, what more can I drive
into my process to make the out-
come more dramatic? What kind of
analytics can change the way I work
in one of my processes? How will
I be able to generate a completely
new revenue stream with my exist-
ingsalesandmarketingforce?
How do you go about the process?
Anybenchmarks?
Reducing headcount on a par-
ticular project would prima facie
seem like a great way to improve
efficiency and reduce cost on the
project. But that may not always
be an incentive for the provider
and its staff to innovate. Instead
gain-sharing, productivity and out-
come-based benchmarks are bet-
ter methods to innovate.
Providers should nurture a cli-
mate of innovation and motivate
the staff by including contractual
incentives. Providers should also
work towards creating leaders that
motivate the staff and inspire them
to work towards measurable inno-
vation-centricprojects.
Providersandclientshavetoengage
inarelationshipthathasmaturedfar
beyondthe‘vendor-buyer’construct

theraconteur.co.uk twitter.com/raconteurmedia06
For most people, outsourcing is so
synonymous with “cutting costs”
and “maximising efficiencies” that
it is barely thought to have any
other influence on organisations
outside these narrow boundaries.
In fact, research from the National
Outsourcing Association found that
almost two-thirds (65 per cent) of
the general public associate out-
sourcing with cost-cutting.
This is not an accurate reflection
of the way modern businesses use
outsourcing. From global giants to
aspirational start-ups, organisa-
tions consciously choose outsourc-
ing as a means of enabling growth,
whether that’s increasing reve-
nue, extending the customer base,
entering a new market or growing
market share.
An independent study demon-
strates how far outsourcing has
come to enable growth among UK
businesses. Conducted by Cole-
man Parkes Research, on behalf
of arvato, with 100 senior business
process outsourcing (BPO) clients
across the public and private sec-
tors, the research found that “growth
and expansion” was one of the main
drivers to outsource in 66 per cent of
cases. Only 43 per cent of those sur-
veyed named cost-cutting as one of
thereasonsforoutsourcing.1
“As an outsourcer focused on
enabling our clients’ success, we
see first-hand how outsourcing
can support growth strategies,”
explains Matthias Mierisch, chair-
man and chief executive of arvato
UK Ireland. “The experience,
insight, skills and processes that
an outsourcing partner brings into
the organisation can accelerate
growth plans rapidly within tight
budgets. What’s needed is a part-
nership approach, collaborating
with clients to understand the rea-
COMMERCIAL FEATURE
sons for growth, the ultimate long-
term aims of the business and how
we can help achieve them.”
Unlocking the growth potential
Research commissioned by the
Business Services Association
revealed that the outsourcing
industry accounts for around £113
billion of economic output in the
UK, the equivalent of 8.5 per cent
of gross value added (GVA), and
employs around 10 per cent of all
UK workforce jobs. 2
With the UK’s BPO market out-
growing the wider economy by an
estimated 6.3 per cent in 2013,3
unlocking growth through out-
sourcing could not only benefit an
organisation, but UK plc as a whole.
So what is the key to making
growth-oriented BPO programmes
a success?
Industry experts and outsourc-
ing clients identify three con-
siderations that organisations
must take on board to design and
implement growth-orientated
BPO programmes.
Firstly, organisations need to
determine what type of growth
they want to achieve and how out-
sourcing can best support their
objectives. “If you’re looking to
expand your customer base, then
outsourcing your customer ser-
vice can deliver instant scale and
flexibility to cope with increased
customer demand while ensur-
ing a high-quality service,” says
Mr Mierisch. “Getting new prod-
ucts into the marketplace quickly
requires a streamlined and flex-
ible supply chain infrastructure
which outsourcers can implement
rapidly. Entering new territories
can be bolstered by your BPO part-
ner’s multi-lingual contact centres,
established IT processes or cross-
border payment platforms.”
Secondly, growth has to be an
explicit objective of the outsourcing
partnership from the outset, built
intoaflexiblecontract.
Punit Bathia, finance and account-
ing BPO leader at Deloitte, explains:
“If the pricing model is all about unit
cost, then you won’t get the support
you need for growth. By the same
token, trying to make contracts so
watertightthattheylegislateforevery
possible scenario will stifle the part-
nership’s flexibility and, as a conse-
quence,itsabilitytohelpyougrow.”
Lastly, organisations should look
for a like-minded partner who
shares their vision for growth.
“The outsourcing relationship
should include alignment, such that
it is in the interest of both your sup-
plier and yourself to enable growth,”
says Martyn Hart, chairman of the
National Outsourcing Association.
“When the relationship manage-
ment is really working, and the
supplier and customer are working
together as one team towards one
Outsourcing:
thegrowthenabler?
Business outsourcing is typically viewed as a cost-saving exercise,
though many organisations are using it to support growth plans
vision, this creates a real opportu-
nity to drive innovation and a desire
todeliverexceptionalresults.”
Thereisno“one-size-fits-all”solu-
tion to enabling growth through out-
sourcing. Each organisation, rela-
tionship and agreement is different.
But if the vision is clear and if the
partnership is working together in
the same direction, then outsourc-
ing can be the enabler of choice for
allaspectsoforganisationalgrowth.
As Richard Taylor, head of sup-
ply chain at Toshiba UK, explains, a
well-run relationship is key to pro-
viding businesses with the head-
space they need to concentrate
on growth. “When an outsourcing
partnership is functioning well, it
enables you to focus on the bigger
picture, safe in the knowledge that
your day-to-day operations will be
taken care of,” he says.
Open Outsourcing: enabling
growth
In the second issue of Open Out-
sourcing, due to be published this
Theexperience,insight,
skillsandprocessesthatan
outsourcingpartnerbringsinto
theorganisationcanaccelerate
growthplansrapidlywithin
tightbudgets
summer, arvato will examine how
outsourcinghassuccessfullyenabled
different organisations across the UK
topursuetheirgrowthstrategies.
A series of collaborative reports
designed to get to the heart of some
of the most complex issues in the
industry, Open Outsourcing aims to
demystify outsourcing. Rather than
focusingonthetheoreticalorfuturis-
tic,thereportstakeareal-worldper-
spective on successful relationships
byhearingdirectlyandhonestlyfrom
thepeopleinvolved.
To find out more about Open
Outsourcing and register for your
free copy of the forthcoming report,
please visit: www.arvato.co.uk/
open-outsourcing-thetimes
References
1
ColemanParkesResearch:survey
conductedwith100seniorBPOclients,
onbehalfofarvato,September-October
2012
2
Oxford Economics, November 2012
3
Nelson Hall, 2013
7%
0.7%
7% forecast
growth in UK BPO
market in 2013,
compared to 0.7%
overall economic
growth
Source: NelsonHall2013
ofallUKworkforce
jobscomefrom
outsourcing
of UK economic
output contributed
by outsourcing, the
equivalent of 8.5 per
cent of gross value
added
10%
Source:
OxfordEconomics2012
Source:
ColemanParkes
Research2012
of clients outsource
to cut costs
43%
ofclientssay“growth
andexpansion”isa
maindriverbehind
theiroutsourcing
decision
66%
Source:
ColemanParkes
Research2012
£113bn
Source:
OxfordEconomics2012
£
For most people, outsourcing is so
synonymous with “cutting costs”
and “maximising efficiencies” that
it is barely thought to have any
other influence on organisations
outside these narrow boundaries.
In fact, research from the National
Outsourcing Association found that
almost two-thirds (65 per cent) of
the general public associate out-
sourcing with cost-cutting.
This is not an accurate reflection
of the way modern businesses use
outsourcing. From global giants to
aspirational start-ups, organisa-
tions consciously choose outsourc-
ing as a means of enabling growth,
whether that’s increasing reve-
nue, extending the customer base,
entering a new market or growing
market share.
An independent study demon-
strates how far outsourcing has
come to enable growth among UK
businesses. Conducted by Cole-
man Parkes Research, on behalf
of arvato, with 100 senior business
process outsourcing (BPO) clients
across the public and private sec-
tors, the research found that “growth
and expansion” was one of the main
drivers to outsource in 66 per cent of
cases. Only 43 per cent of those sur-
veyed named cost-cutting as one of
thereasonsforoutsourcing.1
“As an outsourcer focused on
enabling our clients’ success, we
see first-hand how outsourcing
can support growth strategies,”
explains Matthias Mierisch, chair-
man and chief executive of arvato
UK Ireland. “The experience,
insight, skills and processes that
an outsourcing partner brings into
the organisation can accelerate
growth plans rapidly within tight
budgets. What’s needed is a part-
nership approach, collaborating
with clients to understand the rea-
COMMERCIAL FEATURE
sons for growth, the ultimate long-
term aims of the business and how
we can help achieve them.”
Unlocking the growth potential
Research commissioned by the
Business Services Association
revealed that the outsourcing
industry accounts for around £113
billion of economic output in the
UK, the equivalent of 8.5 per cent
of gross value added (GVA), and
employs around 10 per cent of all
UK workforce jobs. 2
With the UK’s BPO market out-
growing the wider economy by an
estimated 6.3 per cent in 2013,3
unlocking growth through out-
sourcing could not only benefit an
organisation, but UK plc as a whole.
So what is the key to making
growth-oriented BPO programmes
a success?
Industry experts and outsourc-
ing clients identify three con-
siderations that organisations
must take on board to design and
implement growth-orientated
BPO programmes.
Firstly, organisations need to
determine what type of growth
they want to achieve and how out-
sourcing can best support their
objectives. “If you’re looking to
expand your customer base, then
outsourcing your customer ser-
vice can deliver instant scale and
flexibility to cope with increased
customer demand while ensur-
ing a high-quality service,” says
Mr Mierisch. “Getting new prod-
ucts into the marketplace quickly
requires a streamlined and flex-
ible supply chain infrastructure
which outsourcers can implement
rapidly. Entering new territories
can be bolstered by your BPO part-
ner’s multi-lingual contact centres,
established IT processes or cross-
border payment platforms.”
Secondly, growth has to be an
explicit objective of the outsourcing
partnership from the outset, built
intoaflexiblecontract.
Punit Bathia, finance and account-
ing BPO leader at Deloitte, explains:
“If the pricing model is all about unit
cost, then you won’t get the support
you need for growth. By the same
token, trying to make contracts so
watertightthattheylegislateforevery
possible scenario will stifle the part-
nership’s flexibility and, as a conse-
quence,itsabilitytohelpyougrow.”
Lastly, organisations should look
for a like-minded partner who
shares their vision for growth.
“The outsourcing relationship
should include alignment, such that
it is in the interest of both your sup-
plier and yourself to enable growth,”
says Martyn Hart, chairman of the
National Outsourcing Association.
“When the relationship manage-
ment is really working, and the
supplier and customer are working
together as one team towards one
Outsourcing:
thegrowthenabler?
Business outsourcing is typically viewed as a cost-saving exercise,
though many organisations are using it to support growth plans
vision, this creates a real opportu-
nity to drive innovation and a desire
todeliverexceptionalresults.”
Thereisno“one-size-fits-all”solu-
tion to enabling growth through out-
sourcing. Each organisation, rela-
tionship and agreement is different.
But if the vision is clear and if the
partnership is working together in
the same direction, then outsourc-
ing can be the enabler of choice for
allaspectsoforganisationalgrowth.
As Richard Taylor, head of sup-
ply chain at Toshiba UK, explains, a
well-run relationship is key to pro-
viding businesses with the head-
space they need to concentrate
on growth. “When an outsourcing
partnership is functioning well, it
enables you to focus on the bigger
picture, safe in the knowledge that
your day-to-day operations will be
taken care of,” he says.
Open Outsourcing: enabling
growth
In the second issue of Open Out-
sourcing, due to be published this
Theexperience,insight,
skillsandprocessesthatan
outsourcingpartnerbringsinto
theorganisationcanaccelerate
growthplansrapidlywithin
tightbudgets
summer, arvato will examine how
outsourcinghassuccessfullyenabled
different organisations across the UK
topursuetheirgrowthstrategies.
A series of collaborative reports
designed to get to the heart of some
of the most complex issues in the
industry, Open Outsourcing aims to
demystify outsourcing. Rather than
focusingonthetheoreticalorfuturis-
tic,thereportstakeareal-worldper-
spective on successful relationships
byhearingdirectlyandhonestlyfrom
thepeopleinvolved.
To find out more about Open
Outsourcing and register for your
free copy of the forthcoming report,
please visit: www.arvato.co.uk/
open-outsourcing-thetimes
References
1
ColemanParkesResearch:survey
conductedwith100seniorBPOclients,
onbehalfofarvato,September-October
2012
2
Oxford Economics, November 2012
3
Nelson Hall, 2013
7%
0.7%
7% forecast
growth in UK BPO
market in 2013,
compared to 0.7%
overall economic
growth
Source: NelsonHall2013
ofallUKworkforce
jobscomefrom
outsourcing
of UK economic
output contributed
by outsourcing, the
equivalent of 8.5 per
cent of gross value
added
10%
Source:
OxfordEconomics2012
Source:
ColemanParkes
Research2012
of clients outsource
to cut costs
43%
ofclientssay“growth
andexpansion”isa
maindriverbehind
theiroutsourcing
decision
66%
Source:
ColemanParkes
Research2012
£113bn
Source:
OxfordEconomics2012
£

07
theraconteur.co.uk twitter.com/raconteurmedia
Increasinglycompanies
fromallindustriesarerealising
thattheopportunitiesofsocial
mediaarejusttoogoodtomiss
ȖȖ Twitter, Facebook, LinkedIn,
YouTube, Google+, Yammer... the
listgoeson.Atlastcount,therewere
more than 200 mainstream social
networks, ranging from microblog-
ging to image-sharing and even an
onlinehubforCatholicprayer.
Facebookcrossedthebillionactive
user mark last year, while 400 mil-
lion tweets are posted across the
globe each day. And as the digital
landscape becomes increasingly
social, businesses across all indus-
triesarebeingforcedtoevolve.
The outsourcing sector is no
exception.Beitacallcentre,anout-
sourced IT department or a bailiff-
on-demandservice,themajorityof
thesefirmsnowhaveapresenceon
eachoftheleadingsocialnetworks.
Theyrespondtotweetsofbehalfof
clients, engage their staff through
internalnetworksorhaveproducts
and services that now include a
socialdimension.
One outsourcing firm to arise
from the primordial soup of
digital to become a sentient social
animal is Webhelp TSC. Founded
in 1995, this contact centre busi-
ness traditionally answered calls
and emails for its clients. These
days, the firm instantly responds
to end-user queries on forums,
webchats, Twitter, Facebook,
YouTube and LinkedIn.
“When we first started offering
the social media services, people
accused me of ‘eating my own
breakfast’,” says Webhelp TSC’s
chiefexecutiveDavidTurner.“But
inordertostayinbusiness,wehad
to make sure that we could talk to
ourclients’end-usersonwhatever
device and across whatever plat-
form they wanted.”
Mr Turner’s call centre staff
have now been trained up to be
online “gurus”. The company gets
under the skin of a new client,
learns all about its products and
services, and then hits the web.
“It’s not that different to training
a call centre agent,” he says. “You
just have to understand what the
customer wants.”
However,thereareplentyofrisks
inherent for brands operating in
thistransparentlysocialnewworld.
“Ifyou’reonthephoneandyougeta
brandpiecewrong,it’sone-on-one,”
saysMrTurner.“Ifyougetitwrong
onTwitter,it’sonapublicplatform.
That’swhyyouhavetomonitorsen-
timentverycarefully–respondbut
never react. There’s a lot of forgive-
ness for brands who own up and fix
theirmistakes.”
Dominic Dryden, a partner at
technology law firm Olswang,
agrees.“Despitetheinherentrisks,
increasingly companies from all
industries are realising that the
opportunities of social media are
just too good to miss,” he says. “It
isthereforecrucialthatcompanies
identify the risks that are specific
to them, set clear guidelines and
develop a crisis plan so that they
are ready to respond quickly
should something go wrong.”
Malcolm Frank, chief strategist
at NASDAQ-listed IT outsourcer
and consultancy Cognizant, has
direct experience of this. “The
riskswe’vefacedhavemainlybeen
cultural ones,” he says. “When we
launched our social offering five
yearsago,aguyinAsiastartedtalk-
ing about Osama bin Laden and
said, contextually, that he could
understand where much of Al-
Qaeda’s anger came from. That
didnotgodownwellwithourasso-
ciates in New York.”
ButMrFranksayssocialmediais
still mandatory. “You have to trust
peopletobegrown-ups.Willthere
be a few people who mess up? Of
course,buttheyarerelativelyeasy
to spot and the risks are actually
pretty small,” he says.
One entrepreneur using social
media as a damage limitation
tool is Jamie Waller, founder of
outsourced bailiff service JBW
Group. You would think that, as a
bailiff firm undertaking contracts
for local government, Mr Waller
would give public social networks
a wide berth. Not so. “If someone
complains, we respond within
eight minutes,” he says. “We ask
them to DM [direct message] us
and call them immediately, and
then that person ends up saying
nice things about us.”
This real-time customer service
trailworkswonderswhenMrWaller
comestobidfornewcontracts.“It’s
evidenceofhowwellwe’lldealwith
their customers,” he says. Twitter
has also proved to be a useful lead-
generation tool for the firm. “You
can go straight to the senior deci-
sion-maker,”MrWallerexplains.
Chris Barbin, chief executive of
outsourced cloud broker Appirio,
believes that platforms like Face-
book and Twitter are ideal for
customer retention in addition
to acquisition and management.
“If I look at my top ten CIO [chief
informationofficer]relationships,
Iinteractwithfourofthetenmore
onFacebookthanIdoonanyother
channel,” he says. “I don’t call or
send an email, I send a Facebook
message. And when he responds,
he’ll have seen my holiday snaps
and it’s all very social.”
There’s no doubt that the out-
sourcing industry is embracing
social en masse, but it’s still a
walled garden. Big blue chips will
only work with outsourcers with
proven form in the social realm.
Noonewantstoriskabrandmelt-
down in public. As all too many
firms have found to their cost, the
internet never forgets.
SOCIALMEDIA
ofconsumers
research
productsonline
throughsocial
networkingsites
Source:
Compuware
Corporation
60%
mainstreamsocial
networksworldwide
200
Source:
International
Association of
Outsourcing
Professionals (IAOP)
oftheIOAP’stop
outsourcingfirms
haveoneormore
handlesonTwitter
20
Source: IAOP
SUCCESSFULOUTSOURCERS
ARESOCIALANIMALSNOW
Thepowerofsocialmediaisbeing
harnessedbyoutsourcerstoengage
withclientsandend-users,asRebecca
Burn-Callanderreports

Beyondprice:
expectoutsourcing
totransformyour
business
Intheearlydaysofcustomermanagement
outsourcing,costreductionwastheonlyshowin
town.Themantrawassimple:handovernon-core
processestoaspecialistproviderandleverage
theireconomiesofscaletomaximiseefficiency.
It’sareasonableapproach,saysWebhelpTSC’s
chiefexecutiveDavid Turner,exceptthatit
completelyignoresthecustomer.Hereheoutlines
amoreevolvedapproachtooutsourcing;one
inwhichtheneedforeconomyisbalancedbya
revenue-enhancingfocusonthecustomer.Expect
outsourcingtodeliverbenefitsonbothsidesofthe
balancesheet,headvises,andlookbeyondpricefor
opportunitiestotransformyourbusiness
Through the 1980s and 90s cost
reduction was the primary goal of
most outsource customer manage-
ment relationships. Performance
was driven by tough productiv-
ity targets and suppliers routinely
compromised quality to avoid the
financial penalties incurred if they
weren’t met. Beyond question, cus-
tomers suffered. Clients suffered
too, because customer discontent
leads rapidly to disaffection and
revenue loss.
Today, we live in a more enlight-
ened world. Ninety per cent of
organisations now see the drive for
customer satisfaction as intrinsic to
their strategy and 63 per cent view
customer experience as a com-
mercial differentiator1
. Recognis-
ing that customer management
operations drive the customer
experience, they are looking to out-
sourced service providers (OSPs)
to add value rather than reduce
cost. In turn, progressive OSPs are
aligning their performance against
business outcomes that matter –
increased customer satisfaction,
loyalty, advocacy and spend.
Of course, OSPs still have the
economies of scale that were so
attractive in the early days. Which
means their clients should expect
them to achieve efficiency in line
with value. The common mistake in
early outsourcing contracts was to
penalise poor productivity without
rewarding the creation of business
value. It’s time to turn that situation
around, so that OSPs are finan-
cially motivated to deliver trans-
formation around four key factors:
cost, revenue, customer experi-
ence and advocacy.
We’ll look at each of these four
factors in turn, but first let’s con-
sider one development that is inev-
itably changing the OSP-client
relationship: the rise of alternative
communication channels.
Channel challenge
For decades OSPs have sold a
commodity: banks of people to
handle quantities of telephone
calls for an agreed price per seat
or hour. That was fine while the tel-
ephone dominated. It works less
well in today’s multi-channel envi-
ronment. Mature OSPs are posi-
tioning themselves to manage mul-
tiple interaction channels and to
advise clients on the way their cus-
tomers might select and use them.
With a contracting model based
on agent seats alone, this simply
isn’t achievable. When the financial
relationship is based on transfor-
mational achievements related to
ence and advocacy, it certainly is.
Brave outsourcers will link
their remuneration to the deliv-
ery of those benefits. The ability to
deliver transformational change
in a multi-channel environment
depends on an understanding of
customer behaviour and how it can
be influenced. Recent technology
advances have made it possible to
hear the voice of the customer by
capturing data from interactions
across all channels but, of itself,
data has little value without the
ability to interrogate it effectively
and turn it to good use. This is an
area we have invested in heavily
to create one of a set of “SMART”
methodologies that underpin our
transformational approach.
We have built a team of customer
insight specialists who turn data
into intelligence, then use it to
reduce cost and to build revenue
for our clients, and to create a cus-
tomer experience that drives advo-
cacy. It is my conviction that, in the
future, an OSP’s currency of value
will be actionable insight rather
than agent hours.
Source of cost savings
Cost savings in today’s customer
management environments won’t
be found by waving the productiv-
ity stick, but by managing contact
demand across channels. By using
analytics to understand why cus-
tomers make contact, an OSP can
identify those contacts that are
avoidable because they are caused
by mistakes or broken processes
elsewhere in the business, and
support customer-focused change
by producing irrefutable evidence
of the value it will deliver in terms
of improved customer experi-
ence and reduced business cost.
Equally, it is possible to focus on
first-contact resolution, identify-
ing the broken processes within
the customer management opera-
tions that prevent customers from
getting the right answer first time.
TIP: Challenge your OSP to eradi-
cate sources of unnecessary cost
within the customer manage-
ment operation and to provide
insight that will help the rest of
the organisation to resolve issues
that frustrate customers
Revenue win
Just as analytics and customer
journey mapping can identify
opportunities to resolve issues,
they can also identify sales oppor-
tunities and inform an understand-
ing of how they are won or lost.
Again, this is a multi-channel pro-
cess. A customer may research a
product on a company’s website,
evaluate reviews via social media
then phone the contact centre to
check information before buying.
Across that complex customer
journey, barriers to the eventual
purchase can be understood and
removed, and the right sales prop-
ositions – either for first-time pur-
chases, cross-sells or upgrades –
presented at the right time.
In the voice-channel environ-
ment in particular, we have worked
intensively to enable agents to
interpret buying signals and pre-
sent the right cross or upsell prop-
osition at the right moment.
TIP: Ask your outsourcer to boost
sales performance by remov-
ing the barriers to purchase and
translating service conversations
into sales opportunities
£15m
revenue boost
for a top-notch
international
office supplies
company
Commercial Feature
of organisations
now see the drive
for customer
satisfaction as
intrinsic to their
strategy
90%
GOAL:
REDUCE COST
CHANNELS:
PHONE
SUCCESS MEASURES:
PRODUCTIVITY-DRIVEN SLAs
CONTRACTING MODEL:
PER SEAT/AGENT HOUR, PENALTIES
FOR PRODUCTIVITY FAILURE
OSP STATUS:
SUPPLIER
Beyondprice:
expectoutsourcing
totransformyour
business
Intheearlydaysofcustomermanagement
outsourcing,costreductionwastheonlyshowin
town.Themantrawassimple:handovernon-core
processestoaspecialistproviderandleverage
theireconomiesofscaletomaximiseefficiency.
It’sareasonableapproach,saysWebhelpTSC’s
chiefexecutiveDavid Turner,exceptthatit
completelyignoresthecustomer.Hereheoutlines
amoreevolvedapproachtooutsourcing;one
inwhichtheneedforeconomyisbalancedbya
revenue-enhancingfocusonthecustomer.Expect
outsourcingtodeliverbenefitsonbothsidesofthe
balancesheet,headvises,andlookbeyondpricefor
opportunitiestotransformyourbusiness
Through the 1980s and 90s cost
reduction was the primary goal of
most outsource customer manage-
ment relationships. Performance
was driven by tough productiv-
ity targets and suppliers routinely
compromised quality to avoid the
financial penalties incurred if they
weren’t met. Beyond question, cus-
tomers suffered. Clients suffered
too, because customer discontent
leads rapidly to disaffection and
revenue loss.
Today, we live in a more enlight-
ened world. Ninety per cent of
organisations now see the drive for
customer satisfaction as intrinsic to
their strategy and 63 per cent view
customer experience as a com-
mercial differentiator1
. Recognis-
ing that customer management
operations drive the customer
experience, they are looking to out-
sourced service providers (OSPs)
to add value rather than reduce
cost. In turn, progressive OSPs are
aligning their performance against
business outcomes that matter –
increased customer satisfaction,
loyalty, advocacy and spend.
Of course, OSPs still have the
economies of scale that were so
attractive in the early days. Which
means their clients should expect
them to achieve efficiency in line
with value. The common mistake in
early outsourcing contracts was to
penalise poor productivity without
rewarding the creation of business
value. It’s time to turn that situation
around, so that OSPs are finan-
cially motivated to deliver trans-
formation around four key factors:
ence and advocacy.
We’ll look at each of these four
factors in turn, but first let’s con-
sider one development that is inev-
itably changing the OSP-client
relationship: the rise of alternative
communication channels.
Channel challenge
For decades OSPs have sold a
commodity: banks of people to
handle quantities of telephone
calls for an agreed price per seat
or hour. That was fine while the tel-
ephone dominated. It works less
well in today’s multi-channel envi-
ronment. Mature OSPs are posi-
tioning themselves to manage mul-
tiple interaction channels and to
advise clients on the way their cus-
tomers might select and use them.
With a contracting model based
on agent seats alone, this simply
isn’t achievable. When the financial
relationship is based on transfor-
mational achievements related to
ence and advocacy, it certainly is.
Brave outsourcers will link
their remuneration to the deliv-
ery of those benefits. The ability to
deliver transformational change
in a multi-channel environment
depends on an understanding of
customer behaviour and how it can
be influenced. Recent technology
advances have made it possible to
hear the voice of the customer by
capturing data from interactions
across all channels but, of itself,
data has little value without the
ability to interrogate it effectively
and turn it to good use. This is an
area we have invested in heavily
to create one of a set of “SMART”
methodologies that underpin our
transformational approach.
We have built a team of customer
insight specialists who turn data
into intelligence, then use it to
reduce cost and to build revenue
for our clients, and to create a cus-
tomer experience that drives advo-
cacy. It is my conviction that, in the
future, an OSP’s currency of value
will be actionable insight rather
than agent hours.
Source of cost savings
Cost savings in today’s customer
management environments won’t
be found by waving the productiv-
ity stick, but by managing contact
demand across channels. By using
analytics to understand why cus-
tomers make contact, an OSP can
identify those contacts that are
avoidable because they are caused
by mistakes or broken processes
elsewhere in the business, and
support customer-focused change
by producing irrefutable evidence
of the value it will deliver in terms
of improved customer experi-
ence and reduced business cost.
Equally, it is possible to focus on
first-contact resolution, identify-
ing the broken processes within
the customer management opera-
tions that prevent customers from
getting the right answer first time.
TIP: Challenge your OSP to eradi-
cate sources of unnecessary cost
within the customer manage-
ment operation and to provide
insight that will help the rest of
the organisation to resolve issues
that frustrate customers
Revenue win
Just as analytics and customer
journey mapping can identify
opportunities to resolve issues,
they can also identify sales oppor-
tunities and inform an understand-
ing of how they are won or lost.
Again, this is a multi-channel pro-
cess. A customer may research a
product on a company’s website,
evaluate reviews via social media
then phone the contact centre to
check information before buying.
Across that complex customer
journey, barriers to the eventual
purchase can be understood and
removed, and the right sales prop-
ositions – either for first-time pur-
chases, cross-sells or upgrades –
presented at the right time.
In the voice-channel environ-
ment in particular, we have worked
intensively to enable agents to
interpret buying signals and pre-
sent the right cross or upsell prop-
osition at the right moment.
TIP: Ask your outsourcer to boost
sales performance by remov-
ing the barriers to purchase and
translating service conversations
into sales opportunities
£15m
revenue boost
for a top-notch
international
office supplies
company
Commercial Feature
of organisations
now see the drive
for customer
satisfaction as
intrinsic to their
strategy
90%
GOAL:
REDUCE COST
CHANNELS:
PHONE
SUCCESS MEASURES:
PRODUCTIVITY-DRIVEN SLAs
CONTRACTING MODEL:
FOR PRODUCTIVITY FAILURE
OSP STATUS:
SUPPLIER

Experience factor
There has been a lot of talk in
customer management circles
recently about customer experi-
ence. But what makes an experi-
ence “good”? To my mind, a “good”
experience is one that is easy for
the customer and profitable for the
organisation. To that end we have
adopted the “Customer Effort”
measure with enthusiasm. Mak-
ing it easier for customers to make
contact, resolve their issues and
complete their purchases can only
have two outcomes: it will cost
less to serve them and they will be
more likely to spend.
TIP: Establish Customer Effort as
a key performance measure in
your outsourcing relationships
– ahead of traditional product-
ivity measures
Achieving advocacy
Elevating an “easy” experience
into a “delightful” one is the source
of customer advocacy – the Holy
Grail pursued by every sensible
organisation. It requires empa-
thetic agents empowered to deliver
informed, relevant responses.
Psychological research has
repeatedly shown that direct
behavioural experiences (contact
centre conversations not least)
have the greatest impact on peo-
ple’s attitudes towards brands. To
my mind, it is for this reason that
Customer Effort must be supple-
mented by “Customer Satisfac-
tion” (CSat) and “Net Promoter
Scores” (NPS) as key measures
within an outsourcing relationship.
To capture precisely the impact of
the customer interaction on advo-
cacy, we have developed “Touch-
point NPS”. Contacting customers
immediately after an interaction –
via any channel – and asking about
its impact on their likelihood to
recommend the company, gives a
true measure of how brand value is
being built or destroyed.
TIP: Use Touchpoint NPS to
gain a precise measure of your
OSP’s contribution to brand value
and advocacy
All to be gained
We have talked at length here about
evolution towards value-focused
customer management outsourc-
ing. For several years now, the
Global Contact Centre Benchmark-
ing Report has reflected this evolu-
tion, reporting an increased focus
on value generation in outsourcing
decisions. It is sad then that, in last
year’s survey, the number of organ-
isations quoting the need to “save
money” as their principal motiva-
tion to outsource had doubled2
.
A knee-jerk reaction, perhaps to
several years of recession and
economic stagnation. If it signals a
return to the bad old days of “pro-
ductivity at any price”, customers
will vote with their feet. As I hope I
have convinced you here, there is
so much more to be gained than a
penny pinched from the cost of call.
Expect outsourcing to transform
your business and it will transform
your cost base, too.
David Turner is chief executive
of Webhelp TSC, an outsourced
service provider that has
trebled its business in five
years by focusing on value-
based outsourcing and the
delivery of customer insight
e: experience@webhelptsc.com
w: www.webhelptsc.com
t: +44 (0)1324 575000
Itismyconvictionthat,inthe
future,anOSP’scurrencyofvalue
willbeactionableinsightrather
thanagenthours
1, 2
2012 Global
Contact Centre
Benchmarking
Report,
Dimension Data
£550k
increase in
customer
satisfaction
for a leading
entertainment and
communications
business
10%
in revenue
enhancement and
cost reduction for
a powerful mobile
telco brand
GOAL:
PRODUCTIVITY AND CUSTOMER
SATISFACTION
CHANNELS:
PHONE (POSSIBLY EMAIL)
SUCCESS MEASURES:
PRODUCTIVITY SLAs PLUS
RUDIMENTARY CSAT
CONTRACTING MODEL:
FOR PRODUCTIVITY AND CSAT FAILURE
OSP STATUS:
PARTNER
CREATION OF BUSINESS VALUE:
REDUCE COST WHILE INCREASING: REVENUE,
CUSTOMER EXPERIENCE AND ADVOCACY
CHANNELS:
INTEGRATED MUTI CHANNEL INCLUDING
SOCIAL MEDIA
SUCCESS MEASURES:
- CONTINUOUS IMPROVEMENT IN REVENUE/
COST PERFORMANCE
- ENHANCED CUSTOMER EXPERIENCE (CES)
- ENHANCED LOYALTY (TNPS, CSAT)
CONTRACTING MODEL:
- AGREED PROGRAMME OF
TRANSFORMATIONAL CHANGE
- REMUNERATION LINKED TO DELIVERY OF
AGREED BUSINESS OUTCOMES
- SHARED RISK AND REWARD
OSP STATUS:
VALUE GENERATOR:
- INSIGHT INTO CUSTOMER EXPERIENCES
USED TO REDUCE CUSTOMER EFFORT
AND ELIMINATE UNNECESSARY CONTACT,
THEREBY IMPROVING CUSTOMER SATISFACTION
AND ADVOCACY
Experience factor
ivity measures
Achieving advocacy
and advocacy
All to be gained
.
t: +44 (0)1324 575000
thanagenthours
1, 2
2012 Global
Contact Centre
Benchmarking
Report,
Dimension Data
£550k
increase in
customer
satisfaction
for a leading
entertainment and
communications
business
10%
in revenue
enhancement and
cost reduction for
a powerful mobile
telco brand
GOAL:
SATISFACTION
CHANNELS:
SUCCESS MEASURES:
RUDIMENTARY CSAT
CONTRACTING MODEL:
OSP STATUS:
PARTNER
CHANNELS:
SOCIAL MEDIA
SUCCESS MEASURES:
COST PERFORMANCE
CONTRACTING MODEL:
OSP STATUS:
VALUE GENERATOR:
AND ADVOCACY
Experience factor
ivity measures
Achieving advocacy
and advocacy
All to be gained
.
t: +44 (0)1324 575000
thanagenthours
1, 2
2012 Global
Contact Centre
Benchmarking
Report,
Dimension Data
£550k
increase in
customer
satisfaction
for a leading
entertainment and
communications
business
10%
in revenue
enhancement and
cost reduction for
a powerful mobile
telco brand
GOAL:
SATISFACTION
CHANNELS:
SUCCESS MEASURES:
RUDIMENTARY CSAT
CONTRACTING MODEL:
OSP STATUS:
PARTNER
CHANNELS:
SOCIAL MEDIA
SUCCESS MEASURES:
COST PERFORMANCE
CONTRACTING MODEL:
OSP STATUS:
VALUE GENERATOR:
AND ADVOCACY

10
KNOWING
THECORRECT
BUSINESS
PROTOCOL
Aformalevaluationof
culturalfitshouldbe
partoftheduediligence
process,ratherthanan
afterthought
CULTURE
ȖȖ Whencompaniesdecideontheir
overseas outsourcing strategy and
serviceproviders,duediligenceand
riskassessmentareanormalpartof
the process. However, “soft” issues
like culture often get neglected in
favour of “hard” organisational,
financialandlegalriskfactors.
“Thisisdespitethefactthatmajor
consultingfirmshaveidentifiedcul-
tural differences as the biggest rea-
son for outsourcing projects to fail,”
saysDrChristianePrange,professor
ofinternationalstrategyatEMLYON
BusinessSchoolinFrance.
UNESCO defines “culture” as a
setofdistinctivespiritual,material,
intellectualandemotionalfeatures
of a society. “A kind of mental soft-
warebywhichpeopleoperate,”says
ProfessorPrange.
Thesefeaturesvarywidelyacross
the globe. Some cultures are egali-
tarian; others are hierarchical.
Some perceive time as elastic; oth-
ersextolpunctualityasthehighest
virtue. Some “tell it like it is”; oth-
ers tend towards diplomacy and
avoidconfrontation.
Such differences influence every
area of cross-border business rela-
tionships, systems and processes.
Occasionally, something gets lost
in translation and both sides laugh
attheresultingfauxpasovervirtual
coffee.Atothertimes,culturalmis-
alignment means loss of money or
even a complete breakdown of the
businesspartnership.
Aformalevaluationofculturalfit
should be part of the due diligence
process, rather than an after-
thought.“Ifyoufindyourvaluesare
differentthedayafteryou’vesigned
adeal,thenit’squitehardtorectify
thiswithoutalotofinvestmentand
effort,”saysDominicDryden,head
ofsourcingatinternationallawfirm
Olswang. But give yourself time to
get the fit right. “Long-term rela-
tionshipsneedtoliveandbreathe,”
saysMrDryden.
Foreigncultureisrarelyseenasan
opportunity for synergy. “But you
can use diversity in a very positive
waytoenhanceinnovationandcrea-
tivity,”heinsists.“Youcanalsouseit
tonavigateconflict,ratherthanper-
ceiveitasasourceofconflictitself.”
The responsibility for sorting
out cultural alignment does not lie
solely with the outsourcer, either.
“Bothsidesneedtounderstandand
adapt to the cultural differences,”
says Punit Bhatia, management
consultantatconsultantsDeloitte.
They can gain from each other,
too. For example, the British way
of saying something negative in a
positive way can be very useful in
meetings the world over. You are
unlikely to leave even the most
sensitive party feeling dejected
when, in response to their pro-
posal, you say: “Hmm, that’s an
interesting idea...”
Howtobehaveinbusinesscan
varyingfromcountrytocountry
andinadvertentlycausingoffenceor
lackinglocalinsightcanbeacostly
mistake,writesIwonaTokc-Wilde
When negotiating in Brazil,
expect a great deal of time to
be spent reviewing details. Use
local lawyers and accountants
for negotiations; Brazilians
resent an outside legal pres-
ence. Also, they negotiate with
people not companies, so do not
change your negotiating team or
you may have to start again.
Have you signed a contract with
a Polish partner that has gone
wrong? According to the World
Bank Doing Business 2013 report,
it takes 685 days to enforce a
contract in Poland, from filing
the lawsuit until the judgment is
enforced. Poland ranks 56 out of
185 countries surveyed.
Your Spanish outsourcing partner
may have an unusual employ-
ment benefits structure. “There
is still a tendency to offer sub-
sidised housing and consumer
goods,” says Rachel Mantell,
of consultants Deloitte. Where
northern Europeans would find it
very odd to buy fridges and dish-
washers through their employer,
it’s pretty common in Spain.”
3.BRAZIL 1.POLAND 2.SPAIN
3

11
Chinese guanxi is a connection
two people have built over time,
through mutual exchange of
favours. If you have guanxi with
another, you will do almost any-
thing for them. “You don’t have
to take a bullet for them, but it
could be something genuinely
inconvenient,” says Andrew
Halper, China business consult-
ant at lawyers Olswang.
The Russians are proud about
being Russian and lack a sense
of humour when Mother Russia
pops up in a conversation. “If you
see a Russian struggling with
a pen when signing a contract,
don’t joke that Russian pens
never work, or they’ll be deeply
offended,” says Ignaty Dyakov
from consultancy Russia Local.
If you need legal representation
in Japan, bear in mind that only
bengoshi – Japanese-qualified
lawyers – can represent clients
in proceedings in Japanese
courts or government agen-
cies. Foreign lawyers, who are
licensed to practise in Japan,
can usually only provide legal
advice about their home country.
Is your Saudi partner green,
yellow or red? In a bid to limit the
number of expats working in the
Saudi Arabia, the government
is now proposing that all private
sector companies be colour
coded, with green companies
employing the highest number of
Saudis and red ones having a long
way to go to reach their quota.
For Filipinos, status matters. “In
an outsourcing centre, the man-
ager’s status is often measured
by the number of people who
work for them,” says Shamus
Rae, head of outsourcing at
KPMG management consulting.
They won’t want to identify new
working practices that could
reduce the ranks of subordi-
nates below them.
6.CHINA 4.RUSSIA 7.JAPAN 5.SAUDIARABIA 8.THEPHILIPPINES
2
1
4
5
6
7
8

12
ȖȖ In the world of outsourcing,
termslike“backshoring”,“inshor-
ing”and“reshoring”areattracting
significant attention. While the
words themselves might be lin-
guisticallyawkward,theyallmean
moreorlessthesamething:bring-
ingprocessesorservicesbackfrom
an offshore location.
In the past, many companies
looking to outsource business
processes have aimed to take
advantage of lower costs in loca-
tions like China and India. But,
with wage expectations steadily
increasing in these locations, they
nolongerlookasattractiveasthey
once did. The cost benefits com-
panies may have enjoyed in the
early days of offshoring have been
steadily eroded, in some cases to
the point where the advantages
are now negligible.
While costs may be rising in the
best-known offshoring destina-
tions, there are plenty of other
low-cost locations to choose from.
Amanda Flynn, senior manager
at Baringa Partners, says that in
some cases companies are moving
processes within India from big-
gercitiestocheaperruralareas.In
others, they are moving into less
widely known countries, such as
Malaysia and the Philippines.
But hopping from country to
country in order to keep ahead of
growing wages is arguably never
going to be a long-term solution.
“At some point you are chasing
aroundtheworldlookingforwage
arbitrage and that is what has
drivenpeopletothinkaboutdoing
itbetter,”saysMatthewBennett,a
partner at law firm Olswang.
Mr Bennett says this realisation
has led some companies to move
away from focusing on cost alone
and that companies are increas-
ingly looking at where functions
canbecarriedoutmosteffectively.
“In some industries, such as auto-
motive, people are learning that, if
you have better educated people
and better processes, the overall
cost actually means that you can
have them in a location that is
closer to your customers or closer
to your head office,” he says.
While companies have histori-
cally based call centres in India,
some are now reconsidering this
approach. In 2011, for example,
Santander moved its Indian call
centres back to the UK. Hav-
ing outsourced its call centre
operations in 2003, the bank was
prompted by customer feedback
toreversethemoveandhandlethe
callsincentresinGlasgow,Leices-
ter and Liverpool.
“Sincethe‘in-sourceproject’was
completed in July 2011, we have
seen an increase in ‘overall satis-
faction’ in our call centres, from
58 per cent to 73 per cent or 26
per cent uplift as of Q1 [first quar-
ter] this year,” says Colin Webb,
Santander’s UK director of retail
contact centres. “The ‘in-source
project’ has played a key part in
this increase in satisfaction.”
More recently, UK-based food
manufacturer Symington’s has
decided to move noodle manufac-
turing from Guangzhou to Leeds,
stating that the cost of produc-
ing noodles is no longer cheaper
in China.
Caldeira,acushionmanufacturer
headquartered in the UK, is also
in the process of bringing produc-
tion back home. In 2003, Caldeira
closed its UK factory and set up a
Chinese joint venture in order to
manufacture its goods. While the
modelworkedwelltostartwith,ris-
ing labour costs began to take their
tollandsalariesforproductionstaff
havetripledinlocalcurrencyterms.
BACKSHORING
MAKINGNOODLES
ISCHEAPERHERE
THANINCHINA
Manufacturingandservicesthatwere
onceoutsourcedhaveturnedfullcircle,
asRebeccaBracereports
UK-basedfoodmanufacturer
Symington’shasdecidedtomovenoodle
manufacturingfromGuangzhouto
Leeds,statingthatthecostofproducing
noodlesisnolongercheaperinChina
ofcompanieshavebrought
productionbacktotheUK
40%
ofUKfirmshaveincreased
theiruseoflocalsuppliers
Source: EEF
25%
increaseinChineselabour
costsinthelastyear
Source: The Wall Street Journal
20%
ofmanufacturersinNorth
Americaplantobringproduction
homeorclosertohome
Source: UHY Advisors
21%

13
As a result, in 2011 the company
began to move some of its labour
back to the UK. “We now produce
some cushions more cheaply in
the UK than in China,” says Tony
Caldeira, the company’s founder
and managing director.
The UK is not the only country
in which backshoring is becom-
ing more common. Caterpillar is
moving production of construc-
tion equipment from Japan to the
United States, while GE moved
some of its manufacturing from
China to Kentucky in 2010. But
what has been driving this shift?
Olswang’s Mr Bennett observes
thatthebackshoringofcallcentres
is being driven by a combination
of cost considerations and the
emergence of more sophisticated
technology, such as the ability to
use robotic automation to process
emails.Theexpectationisthatwith
more customers communicating
via email, it will be possible to pro-
cess more customer contact auto-
matically and therefore without
theneedforhumanintervention.
“That means you need to have a
smaller call centre and can start
to have a really high value contact
centrethatcanbeplacedanywhere
in the world,” he says. “We are see-
ing that people are changing the
way they run the process and are
then deciding where best to locate
it.Anditmightbebesttolocateitin
the UK because that’s where other
businessfunctionsareanditmakes
sensetohaveeverybodyalotcloser
tothecoreofthebusiness.”
While rising labour costs are
a major factor, other drivers are
also coming into play. One of
these is the issue of quality, says
Lee Hopley, chief economist at
manufacturers’ association EEF.
“Ifyouareamanufacturerandyou
aredoingsomethingthatisquality
dependent, you can’t risk having
shipmentsofgoodsthatarenotup
to spec,” she says.
Ms Hopley adds that natural dis-
asters, such as the 2011 Japanese
tsunami,havestartedtoraiseques-
tion marks about the resilience of
valuechaininfrastructurestretch-
ing thousands of miles. “If you
are relying on a sole supplier and
something goes wrong, it has sig-
nificant implications on your abil-
itytogetordersoutofthedoor.”
According to Mr Caldeira, there
are many other reasons why
companies prefer to manufac-
ture goods in their home coun-
try, including shorter lead times,
greater flexibility, better credit
terms, and the ability to commu-
nicate in the same language and
time zone.
While companies may stand to
benefit from backshoring, this
is not a decision that should
be entered into lightly. Where
manufacturing is concerned, Mr
Caldeira observes that some skills
have been lost in the UK since off-
shoring first became popular. As
a result, recruiting staff for tasks,
such as fabric cutting and operat-
ing industrial sewing machines,
have proved difficult.
“Reshoringischallenging,”warns
Glenn Hickling, communications
manager of the National Out-
sourcing Association. “The cost
and effort of finding the perfect
onshore or nearshore supplier is
often underestimated, and can
pull resources away from other
essential projects and activities.”
MrHicklingaddsthatcompanies
should “be sure the resource that
replaces the offshore activity is
going to compete, in terms of effi-
ciency and effectiveness, and that
you are ready to deliver stronger
results on home shores”.
Magmatic, manufacturers of the
Trunki ride-on children’s suit-
case, initially made its product
in China, but in 2012 took the
decision to move manufacturing
to the UK.
Rob Law, the company’s
managing director, says that
factors contributing to the deci-
sion included the devaluation of
sterling against the US dollar.
“The cost of shipping was up and
down all the time. A couple of
years ago, we tried to under-
stand what our actual margin
was for our products in China
and it was almost impossible
to pin it down because it kept
changing,” he says.
At the same time, the decision
was taken to re-engineer the
product in order to make it cost-
effective for Western production
as well as fully recyclable – a
process that involved removing
all metal components from the
design. “This has allowed us to
make it very competitively com-
pared to China,” Mr Law explains.
The backshoring process has
not been without its hiccups. A
factory that the company used
in the UK did not produce the
goods at the expected speed.
“We discovered in late-Novem-
ber that the factory had had
such financial difficulties trying
to scale up its organisation that
they were days away from going
into administration,” he says.
“So we ended up buying them
out of administration.”
As a result, the company now
manufactures plastic goods for
other UK companies through
the factory. Mr Law says these
companies are also looking to
onshore more of their product
range. “If you want to be in
control of your margins and
know how much you are paying
for goods for a decent period of
time, then I would highly recom-
mend it,” he concludes.
PACKINGUP
TOCOME
backHOME
Somethings,like
makingnoodles,are
nowdoneintheUK
ratherthanChina
© Georgia Glynn Smith

14
ȖȖ We often think outsourcing is a
new phenomenon. It isn’t. Rulers
have been doing it for millennia.
Witness the contracting of mer-
cenary Saxons in the early-5th
century to keep the Picts at bay or
the East India Company, a private
firm, which ran India on Britain’s
behalf, profitably and vicariously,
for a century.
Yet it’s only since the late-1980s
that the word has come to identify
more than a passing political or
military phase. For many of us,
outsourcinghascometodefineour
very lives.
We may be employed by one of
Britain’s outsourcing giants, such
as Serco, Capita or Virgin Care.
Our banks and utilities deploy
them to deal with our telephone
calls and emailed queries. Emer-
gencycallstoyourlocalGPduring
the witching hours are likely to
be routed through a third-party
provider.Sixtyyearsago,allofthis
was provided by your local county
council; now, hardly any of it is.
Yet outsourcing doesn’t just
“happen”;ithastobeorchestrated,
managed, supervised and regu-
lated. Nor does this story involve
onlygiantservicecontractors.This
is also a tale about the individu-
als behind the scenes, pulling the
strings – the people who make our
modern world work.
Melvyn Caplan is one of these
people. Retired IBM sales direc-
tor, he is a Conservative cabinet
member of Westminster City
Council, responsible for finance
and customer services.
Councillor Caplan was first
elected in 1990, two years after
the council negotiated its first
outsourcing contract, involving
the disposal of residential and
commercial waste. Even by the
standards of its day, this was a
landmark deal – a management
buyout no less, led by a senior
council manager and backed by
privatemoney.Thatcontract,now
worth£40millionayear,hassince
passed on to the French services
provider Veolia.
Heseespublicandprivate-sector
outsourcing as two sides of the
same coin. “We aren’t really that
much different from any other
commercial company in terms of
how we operate,” he says. Here, he
points to John Lewis and Marks
Spencer, both keen outsourcers
for decades.
Mr Caplan doesn’t view the pro-
cess of outsourcing – heralded by
some and hated by others – as an
ideological movement. “This isn’t
aboutsayingtheprivatesectorcan
do things best.
We aren’t dogmatic. It’s all about
delivering the best possible ser-
vice to the public. I believe that
you do what you do best and you
leave things that others do better
to them.”
It’s a simple message, but also
one that hides a hugely complex
back-story.First,thefigures.West-
minsterisoneofBritain’swealthi-
est councils, dragging in more
than £1 billion a year in taxes. Yet
most of this cash goes in one door
and out another: £900 million is
channelled straight into the maw
of outsourcers, with the rest used
to pay the council’s shrinking in-
house staff of 2,300.
From this pot, £150 million
goes to Capita, which delivers a
wide range of tricky technical and
human-based services including
housing benefits. Serco gets a fur-
ther £40 million to deal with park-
ing violations, always a controver-
sial service for any council and one
that, Mr Caplan claims, (perhaps a
tadtooeagerly),“makesusvirtually
no profit”. BT recently secured a
chunky contract to run the coun-
cil’s back office and accounting;
other outsourced services include
securityandupkeepofschools,and
keepingroadsfreeofpotholes.
Yet this is just the top-line stuff.
You need to drill down to see how
handing the running of vital ser-
vices to experts tends to benefit
everyone. Mr Caplan flags up the
example of rubbish collections.
The council’s purview includes
some of the world’s richest shop-
pingthoroughfares.Eightseparate
collections are made on Oxford
Street every day; the fuel-efficient
trucks, with built-in GPS tracking,
separate out refuse as they go.
Westminster hosts marathons,
rock concerts and public events
galore, yet it’s rare to see litter-
strewn streets. And the reason is
co-ordination. I mention Bill Bry-
son’s 1991 book Neither Here Nor
There in which he observes that
while “Paris gleams, London is a
toilet”.“Arguably,”saysMrCaplan,
“I would agree that London is
cleaner than Paris these days.”
And therein lies the rub. Out-
sourcing may not always be
everyone’s cup of tea. When
something goes drastically wrong,
like G4S’s Olympic-sized security
foul-up, outsourcers get it in the
neck and rightly so.
However, it’s hard to imagine
modern public services, as we
know them, being provided by
the state alone. Far better, surely,
to ring a trained Capita operator
to query a council tax bill than
to phone a clock-watching func-
tionary in city hall. Thirty years
ago, council taxes didn’t exist and
rubbish was thrown into trucks,
which dumped them directly in
landfills, rather than separating
and recycling.
IfMrCaplanhasonegripe,it’swith
thefactthatweallsufferfromalack
of joined-up government. Councils
increasinglyworkwitheachotherto
providecross-constituencyservices.
Westminster has joined forces with
KensingtonandChelsea,andHam-
mersmithandFulhamtoofferasin-
gleeducationaldirectoratecovering
allthreeboroughs.
Butcommunicationoftenbreaks
down when the needs of local and
central government collide. Mr
Caplan points to the “frictions”
that exist between the NHS and
the need for localised health-
care. “This area is crying out for
reform,” he believes. “A classic
example is the hospital discharge,
where someone is let out of hospi-
tal,yetthereisnoonetheretohelp
them back to their home.”
So where do we go from here?
Could we outsource the council
itself – after all, what exactly are
administrators for?
“Ah, but why do we have great
clean streets,” Mr Caplan replies.
“It’s because we specify [to out-
sourcers] what we want. Veolia
only collects rubbish eight times
a day on Oxford Street because we
tell them to. The service provider
out there is only going to do what
we tell them to. And that’s the
skill of managing any business.
It’s about deciding what you want,
making your message clear, then
ensuring you get what you ask for.
That is why we are here.”
Thisisn’taboutsayingtheprivate
sectorcandothingsbest...it’sall
aboutdeliveringthebestpossible
servicetothepublic
INTERVIEW
Share and discuss online at theraconteur.co.uk
MelvynCaplanisaWestminsterCityCouncilcabinet
memberresponsibleforoutsourcingservices
Theman
responsiblefor
abillion-pound
councilbudget
tellsElliotWilson
why£900million
ayearisspenton
outsourcing
FROMCOUNCILTAXTORUBBISH,
PARKINGANDPOTHOLES
Rubbishcollection
isamongservices
outsourcedbythe
CityofWestminster

15
ȖȖ What can you outsource? Actu-
ally, the question should be: what
can’t you outsource? The truth is
that virtually every business func-
tion is outsourced by someone.
The latest industry segments to
blossom include customer service,
design and production, facilities
management,financeandtreasury,
HR, IT, legal support, marketing,
payroll,PRandreputationmanage-
ment,procurement,secretarialsup-
port,security,recruitment,research
anddevelopment,andtraining.
For online women’s clothing
retailer SoSensational, the new
frontier was outsourcing media
sales. The fashion website gets a
lot of traffic, so it made sense to
sell advertising space, but the firm
didn’t want to do it in-house.
FounderJanShuresays:“Wedid
notwanttheadditionaloverheads,
trainingandrecruitmentrequired
to create our own media sales
team, but also saw that without
media sales we would be merely
another fashion website among a
multitude of ‘portal’ sites relying
on affiliate sales.” By outsourcing
to Ricochet Media, the website
has attracted a dozen big-name
advertisers, something it would
have found hard to pull off via the
traditional approach.
There are several reasons why
outsourcing has widened its scope
over the past decade. The first is
demandfromcompaniesthatwant
tobecomemorecost-effectiveand
serve their customers better to
overcometheeconomicslowdown.
Secondly, as outsourcing vendors
have become more sophisticated,
so buyers feel happier about out-
sourcing comparatively compli-
cated activities.
Statutory change has also had
an impact. For example, the Legal
Services Act, which came into
force last year, allows non-law
firms to provide legal services for
the first time. This has increased
competition in the legal market-
place and allows companies to
farm out routine legal work to
third parties.
Outsourcing has also become
more strategic, according to Chris
Sellers, executive director, stra-
tegic sales, at outsourcing giant
Capita. It’s not just about saving
money;it’salsoaboutaddingvalue.
“Tentotwelveyearsago,therewas
amoresimplistic‘cost-out’driver,”
he says. “But nowadays it’s about
trying to achieve a specific strate-
gic objective, which itself might
change in three years’ time.”
For example, in the public sec-
tor, organisations may be looking
to achieve social outcomes, such
as feeding healthy food to school-
children, while simultaneously
managing their costs.
Furthermore, outsourcers are
more capable at handling tough
assignments. “As the market has
matured, outsourcing has moved
beyond transactional services to
include functions that were previ-
ously considered too complex or
judgement-based to be handled by
a partner,” says Matthias Mierisch,
chairman and chief executive of
businessprocessoutsourcing(BPO)
providerarvatoUKIreland.
“In finance and accounting BPO,
for example, activities such as
invoice processing have become
low-hanging fruit in outsourcing
terms.Theemergingopportunities
are in functions such as financial
planning and risk management,”
he says.
As with any organisational
change, good planning and clear
communication are essential to
making a success of outsourcing.
Otherwise, there is a risk that pro-
cesses and service standards will
becompromised,andtheintended
benefits won’t be achieved.
“No matter which function is
being outsourced, the challenges
alwayscomedowntoculturalalign-
ment and trust,” says Mr Mierisch.
“If an outsourcing partner is going
tobegivenmoreautonomy,thecli-
enthastotrustthat,giventhesame
critical information, their partner
will make the same decision they
would. That can only happen if
there’s a good cultural fit between
thebusinesses.”
In theory, it is possible to out-
source nearly every function of
a company and “virtual compa-
nies” are already far more wide-
spread than most people realise.
In the pharmaceutical industry,
for example, there are knowledge-
based companies that don’t have
any physical assets or infrastruc-
ture, and employ just a core group
of people that might include the
chief executive, chief financial
officer and a legal counsel, as well
as business development and
project-management specialists.
Are there limits? Richard Jones,
chairman of procurement out-
sourcing group Proxima, argues
that organisations should keep
theirbrandmanagementandsales
functionsin-housesincethoseare
crucial to strategy.
But he says the increased vir-
tualisation of companies and
their greater confidence in buying
outsourcedservicesismakingpro-
curement outsourcing a “hotter
and hotter topic”. He also expects
to see more recruitment process
outsourcing, with companies con-
tracting out their recruitment
departments. The benefits of this
include reduced expenditure on
head hunters and job boards, scal-
able recruitment teams – compa-
nies that hire seasonal workers
can scale up or down at will – and
all-round better hiring processes.
The advent of robotics has the
potential to transform the out-
sourcing landscape even further.
According to Mr Jones, robots
could soon be doing some of the
repetitive and rule-driven work
that is carried out by finance and
payrollfunctionsatpresent.These
robots would be servers that exist
in data centres or in the cloud.
Just like a human workers, they
would have access to corporate
systems and be able to receive
work instructions by email.
Sowatchout,therobotsarecom-
ing and they may consign Indian
call centres to the history books
sooner than you think.
Virtualcompaniesarealreadyarealitythanksto
outsourcing,writesSallyPercy,whodiscovers“robots”
aresettobecometheoutsourcersofthefuture
NEXTGENERATION
AREROBOTSVIRTUALLY
THEREALTHING?
Theadventofroboticshasthepotential
totransformtheoutsourcinglandscape
evenfurther

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