Outsourcing providers consistently create and deliver quality services that are capable of beating in-house offers across the board - yet many organisations remain reluctant to use outsourcing to its full potential. This tends to be the common complaint from outsourcers. However, a recent survey by Illuma Research reveals that this reluctance is not as simple as it seems. Nearly six in ten (58%) IT directors surveyed said it had become increasingly difficult for outsourcers to deliver on a promised budget and three-quarters (76%) complained that outsourcers aren’t aligned with their business goals. So what is it that outsourcers aren’t getting right? Why does outsourcing remain a hard sell? And what do outsourcers need to do to win over the sceptics? There are five ways outsourcers can better persuade customers to embrace what they have to offer and gain an edge on their competitors as they do so.
1. Articulate value added in a language they understand Outsourcers can bolster their chances of success by presenting a clear, compellingly evidenced view of the value they will add, explaining how it aligns with business objectives and how they will actually go about delivering it. This could be as simple as explaining how they’ll do the same job better, or how they’ll do similar things in a different way to deliver a better outcome for the company. For those businesses completely unfamiliar with outsourcing, case studies of outsourcing in action are always the best way to win people over.
2. Innovate and tailor your offer to generate an advantage over competitors Service providers should reconsider their mind-set when pitching for work. Outsourcers often settle for bids being incrementally better than the next and simply doing what the client has asked of them, rather than thinking outside of the cost box to deliver outcomes a client might not have thought about - such as employee engagement, consumer advocacy, knock-on efficiencies, risk management or corporate social responsibility. Clients buy in third parties because they recognise that for whatever reason they can’t do the job as well internally. This also suggests they don’t necessarily have all the answers when they put the job out to tender. Yet outsourcing firms are not always innovative when it comes to developing solutions or in challenging the brief – and even when they are, many don’t communicate the benefits of their proposition in a compelling enough way.
3. Follow through on your promise to deliver Outsourcers are increasingly attempting to move from an “each client is unique” approach to being better able to repeatedly manufacture their service offering. As they do this, they’re improving the reliability of their service. However, a significant number of outsourcers are still some way from having built an operating model that can deliver reliably and at a high quality every time. Failing on delivery doesn’t cost outsourcers that one client, but dissuades many prospective clients from using outsourcing solutions as a whole.
4. Use past mistakes and lessons learned to your advantage Failing to capture and analyse the data generated by thousands or millions of past transactions – in a call centre, for example, or every time change is processed in the finance function – deprives outsourcers of the very data that will make their case for future success. Actions speak louder than words, and hard figures capturing the result of these actions speak even louder.
5. Embed yourself in your client’s business for the long term with well-designed contracts With contracts, there tends to be a yoyo of risk and reward between the supplier and the customer. Initially, the client may bear disproportionate risk; then the supplier will - and on it goes. This lack of balance is one reason why outsourcing can leave clients dissatisfied. Striking the balance is crucial because it signals to all parties that a long-term partnership is being formed. The best contract structures align incentives for the long term and make credible performance improvements. This absolutely requires the right contract terms, but also a data-driven view of what is possible, what doesn’t work and why. In doing so, customers and providers can then draft a common action plan, where both entities play a role in generating outcomes that are valued. This process allows a supplier to become a partner for the long-term, elevating itself above competition on margin alone and, in so doing, creating an advocate in the industry. A good example of all five of these tactics in action is the [UK] Department for Transport’s HGV road user levy, which generated £25 million for the public purse in 2014. Northgate Public Services was hired to ensure the 130,000 foreign HGVs taking 1.5million trips across the UK every year were contributing to the maintenance of British roads. The Foreign Operator Payment System they introduced resulted in 95% of HGV operators complying with the new levy. The service was developed through an innovative model that saw the private sector take on the risk of cost of development and implementation, with both the Department for Transport and Northgate reaping the rewards in turn. There are a number of reasons why working with a third party can and should deliver benefits. Outsourcers should offer higher quality for a lower cost than an in-house solution and should have access to talent in ways that their client companies simply don’t. In many cases, barriers to the uptake of outsourcing solutions can be resolved by better communications, whilst in others, outsourcers need to look at their capabilities and tackle them head on. The outsourcers destined to win in the long term are those which are investing in their proposition, in innovation and in talent in order to deliver, reliably and consistently, on their promises.
About the Author Vivek Madan is a partner and Global Head of the B2B Services practice at OC&C Strategy Consultants. He works with clients to address fundamental strategy and change questions, leading the firm’s largest global projects in the outsourcing space.