Rethinking Cost Savings, and Other Outsourcing Benefits

June 14, 2011

Horses for Sources, in conjunction with the London School of Economics Outsourcing Unit, recently published the results of a study on the state of the outsourcing industry in 2011.  The survey was one of the most robust we’ve seen on outsourcing – with over 1,300 respondents – and the results are interesting.  The main conclusion of the study was that firms that outsource are consistently achieving cost savings, but not much else.  You can find an article on the study results here.

The article goes on to elaborate on the three ways outsourcing deals struggle to deliver value beyond cost reduction:

  1. Failure to improve or transform business processes
  2. Failure to introduce new technologies
  3. Failure to empower innovation

After reading the study’s recommendations on how to achieve results beyond cost savings, I’m convinced that the study – and hence the industry – may be taking too narrow of a view on what constitutes a cost savings.  Whenever we talk to prospects about outsourcing, they think of staff cost reductions.  But there are other cost considerations.  Here are more to consider:

  • Technology – cost of maintaining technology platforms in-house, including training employees, ongoing maintenance and upgrades, and hardware investments, etc
  • Regulation – cost of processing changes due to regulations, as well as the benefits of having a provider serve as an ‘insulating layer’, taking responsibility for ensuring processes and systems evolve with laws
  • Capabilities – Cost for infrastructure to enter new markets, handle new asset classes, address local requirements, deal with local vendors, etc
  • Processing – Cost benefit to service level agreements and benchmarking, internal oversight and due diligence

Regarding the types of failures mentioned above – PORTIA’s Outsourcing Services team provides solutions that utilize best-practice workflows, and we meet in person with clients (as recommended by the study) to establish processes that meet client’s explicit needs before we take over client operations.  When clients outsource with PORTIA, our contracts ensure clients are using the latest version of PORTIA, providing access to more functionality and powerful technology (ex: PORTIA v11’s use of cutting-edge technology from Microsoft, tested by us in their labs).  And because we provide hosting services, clients can rest assured that their operation are running on powerful hardware, supported by world-class data centers.  Outsourcing clients need not worry about operations innovations, because PORTIA has substantial R&D and Product Management functions that are continuously and consistently improving the software solutions that underlie our outsourcing offerings.

I’d argue that not only do PORTIA Outsourcing Services meet the extended needs of clients as identified by Horses of Sources’ survey, but that in meeting these needs clients can achieve additional cost savings that go beyond people management savings.

What are your takeaways from the survey, and how do you define the cost savings from outsourcing middle-to-back off operations?

-Munther Haddad, Vice President of Implementation and Outsourcing Services

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2 Responses to “Rethinking Cost Savings, and Other Outsourcing Benefits”

  1. earl said

    great article on the benefits of outsourcing very precise… =)

    Like

  2. This is nice and helpful information.Cost And Efficiency Savings is most important benefits on outsourcing to improve your business.thanks for sharing valuable post.

    Like

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