Enterprises Gain Success through Appropriate Outsourcing Strategy

From Jan. 2004 to Feb. 2004, Accenture Consulting Company made a serial of investigations on outsourcing industry by choosing 565 people from the The Economist’s database. All those selected people have experiences in outsourcing. 220 (39%) companies have more than seven years of experience in outsourcing and 61% of respondents have 2-7 years experience in outsourcing. 78% of the companies belong to earn more than 500 million US dollars annually. This survey targets mainly in North America, Europe and Asia-Pacific regions.

Why strategy outsourcing?

A comprehensive view of those successful enterprises will discover that their business areas, strategies and modes of operation differ greatly from one another. But a further analysis and comparison shows that almost all of them are beneficiaries of strategy outsourcing. Taking a further study and making a conclusion about their secret of successful outsourcing, we will find that they all use advanced tools and approaches to achieve the maximum benefits from outsourcing.

These successful companies know how to manage outsourcing to achieve the optimal commercial return, not simply for the purpose of cost saving. Their performance measuring mechanism is very special, for they will give rewards to the good performance which can be incentives for a better performance. Overall, the methods adopted to manage outsourcing vary from one another among these successful businesses, but they all work out the following results: more outstanding operation, higher profits and more satisfaction at the overall effect of outsourcing.
　　
Why do these companies choose strategy outsourcing? Because it facilitates enterprises to realize successful business transformations in a larger scale. Business process outsourcing commits to the optimal efficiency in the areas of information technology, finance and other important sectors and processes. Although these departments and processes only account for a small portion of the company's total operating costs, but outsourcing targeting these sectors and processes will ignite lasting and extensive business restructuring and process redesigning within the company. Moreover proceeds and benefits from organizational restructuring and process redesigning will far exceed those coming from outsourcing practices targeting certain departments and processes.
　　
During the survey, Accenture defines "experienced outsourcer" as those companies who have outsourced one major business process within recent two years at least. Accenture studied and analyzed these successful outsourcers, and summarized seven keys to successful outsourcing, which are the best outsourcing practices named by Accenture.
　　
Outsourcers should view commercial return as an important standard for evaluating the outsourcing activities from the very beginning. A series of important questions need to be answered before measuring commercial returns. First of all, what do you want to get from your outsourcing partner? Is it the price, speed, quality or all of them? The definitions of outsourcing and offshore outsourcing are often referred to by the media with no clear dividing line, but experienced outsourcers will not think in the same way. They don’t agree that geographical differences in outsourcing should be the most critical factor. They would say: "We should not ask which one to choose, India or Manila? Instead, we should ask what kind of assets and business model we hope to own in the next few years. "
　　
Generally people believe that the sole purpose of outsourcing is to cut costs. However, the survey showed that, those experienced outsourcers possess a more comprehensive envision of benefits brought by outsourcing, though they do not deny the fact that cost-saving is indeed one of the major benefits of outsourcing. 74% enterprises make assessment and management of outsourcing revenues through an overall evaluation of business returns. What is equally important is that, it is better to set up the goal of gaining commercial return as soon as possible. 60% of experienced outsourcers set a clear target from the very beginning of outsourcing activities.

In the process of survey, Accenture defined commercial returns as the results that can be examined or changes in business performance by virtue of certain events, actions or transaction. For those with outsourcing experiences, the range of commercial returns can be very broad, for example, quicker market entrance, lower defective rate and rework rate, less investment in fixed assets, and so on.

The outsourcers should set standards for ideal partners who can provide good outsourcing services to them, including the ability to offer competitive prices, the guarantee of reduction in set cost, the ability to provide extensive capabilities and advantages, and having a long-term record of providing successful services.

The outsourcers should remember that what you truly need is an outsourcing partner, not just an outsourcing service provider. Experienced outsourcers are clearly aware of the necessity to select a really appropriate outsourcing partner instead of only keeping the eyes on the lowest bid or the most attractive cost saving guarantees. Experienced outsourcers also expect more from their outsourcing partners such as professionalism, flexibility, credibility, corporate culture and a series of other capabilities and advantages. In fact, in the Accenture’s survey, a lot of experienced outsourcers considered these "soft advantages" as even more important than the "hard factors", such as price and terms of the contract.