Outsourcing Contracts Increase, but Clients Demand a New Level of Value

May 15, 2012 /

Speaking at the 12th annual Shared Services Outsourcing Network conference in Amsterdam, Claudio Altini, director within KPMG’s shared services and outsourcing advisory practice, suggested that the desire to reduce costs or shrink headcount is no longer the driving force behind business decisions to outsource key operations, despite the return to recession.

He also argued that continued economic uncertainty has forced the outsourcing industry to mature.

He said: “All the evidence suggests that organisations are expanding the services they outsource, but it is no longer accurate to say that they are turning to third-party suppliers just to reduce costs. Today’s challenge is much more about searching for the next level of value, which means ripping up the traditional outsourcing contract and replacing it with guarantees that assure value for money.

“Too often, in the past, outsourcing relationships have broken down because of mixed messages around the three Rs – rates, results and responsibilities. Now, however, businesses are no longer prepared to accept standard terms and conditions for outsourcing their core services. They want proof that service delivery arrangements are flexible, can move with the strategic needs of an organisation and will meet the targets demanded by stakeholders.

“Changing attitudes also mean that the old model of ‘cheapest deal wins’ is unsustainable. The next level of value will see contracts where performance and price are more intrinsically linked and where governance comes to the fore so that there is no doubt where responsibilities lie. The key to the future of the outsourcing industry now lies in simplifying agreements and innovation around charging models, not a pricing model where the cheapest deal wins the day.”

 

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