The business process outsourcing services industry has evolved rapidly in terms of attracting new customers, expanding its verticals and geographic markets, and in transforming from a technology partner to a strategic partner. The global outsourcing market has acquired a new perspective with the growing dependence of organizations on BPO to manage even core management process.
Deloitte on Worldwide Outsourcing and Insourcing
Professional services firm Deloitte recently released a survey report on insourcing and outsourcing trends in 2014. According to the report, Information Technology (IT), legal, real estate and facilities management represent the three most commonly outsourced functions amongst respondents. The survey covered all major industries, including single country firms and MNCs. The participation index of different industries is as follows:
Consumer & Industrial Products — 31%
Financial Services and Insurance — 23%
Technology Media & Telecommunication — 16%
Professional Services — 10%
Healthcare and Life Science — 8%
Energy and Resources — 7%
Public Sector — 6%
Around 69% of respondent organizations are headquartered in North America or Europe. Out of the respondents headquartered in North America, 40% had more than $1 billion in annual revenue and 45% had more than 10,000 employees.
Highlights of the Survey
- Outsourcing is expected to continue to grow at a rate of 12%-26% across functions
- Nearly 60% of outsourcing is IT-related
- In IT, routine elements are usually outsourced and the strategic elements are not
- E-Discovery services offer the greatest growth opportunities in legal services
- Asset and Lease Management are expected to see the most growth in real estate and facility management outsourcing.
- In case of finance and accounting processes, billing is expected to see the greatest growth
- HR administration and reporting are expected to see the greater growth in human resource processes outsourcing
- A significant increase in outsourcing has occurred at EMEA due to relaxation of employment related regulation.
- Expanded data privacy regulation can lead to decreased outsourcing
- Expanded data privacy regulation is one of the reasons for decreased outsourcing
- India will continue to be the primary destination for offshoring
- The respondents were not in favor of legislation to curb offshoring
- Robust vendor management is a critical success factor for outsourcing initiatives
- Spending adequate time during request for proposal (RFP), vendor selection and transition is another critical factor for success in outsourcing deals
- Supplier risk management has become a critical business driver in many industries such as financial services and healthcare
- Technology advancements will diminish the importance of location of service delivery
- Vendor Management challenges persist, especially with respect to staffing the Vendor Management Organization
- Vendor Management Organizations continue to be effective at transactional services such as Financial Management and Contract Management where as it is not much effective with advisory services such as Transition Management and Multi Service Provider Integration
- Vendors are generally meeting service levels and cost targets, and need to shift focus to soft skills and innovation
Like outsourcing, insourcing is also acquiring importance. As per Deloitte’s 2012 Global Outsourcing and In-sourcing Survey report, in-sourcing is also being considered a viable option when the outsourcing deals fail to meet expectations.