Clients always want more and more for less money. Who doesn’t!
In an era of globalisation, social media, automation, speedy technological developments and fragile economics, this is certainly not going away anytime soon. Indeed, the need for enterprises to be modern, efficient and ‘digital’ is more profound than it’s ever been. Comfortable but cumbersome business processes and ways of delivering services to customers are being rattled to the core, not least by millennials who’ve grown up with technology at their fingertips and expect services to be available anytime, anywhere, any place….and immediately. Change is happening at pace, and earlier this week, triggered by comment from a friend and Capita’s recent well-publicised difficulties, the Badger wondered if outsourcing is now ‘old-fashioned’ and thus ripe for overhaul as a concept.
Over the last couple of decades many organisations have used outsourcing to reduce costs, increase operational efficiency and improve service quality. Service providers bent over backwards to help and rubbed their hands with glee given the multi-year nature of the contracts. However, outsourcing is now a mature concept and service providers face the same challenges as their clients plus the need to deliver the profits they expected. The Badger’s experience has been that modest, compact and focused outsources are more successful for the client and the service provider than major, wide-ranging, and often transformational ones with big headline contract values. These days there’s a view that many outsource service providers struggle to achieve their financial objectives from the latter, and Capita’s recent difficulties – and Serco’s before that – certainly provides some support for this view.
So, is outsourcing an ‘old-fashioned’ concept? No. Like all concepts it has its place. It isn’t, however, the panacea it was once often perceived to be, or indeed the gravy train that service providers expected. With digitisation, artificial intelligence, speedy technological developments, and IT commoditisation, the concept of outsourcing is now seeing more pressure with some client organisations consciously taking services back under their own direct control. Recent events with Capita (and Carillion) seem to have raised the scepticism and scrutiny of politicians, government authorities, stock market analysts, and the media. Scepticism that ‘all is what it seems’ with companies with a large portfolio of major outsource contracts is common. Any company with major outsource contracts can, regardless of the merits or otherwise, therefore find itself appearing in gossip circles as the next potential Capita!
The Badger’s nose is twitching. Why? Because ‘Things are never what they seem to be’. Outsourcing is under pressure and it seems unlikely that we’ve heard the last of wobbles on major outsource contracts.