Outsourcing, Benefit, Companies, Capgemini, Study

U.S. companies benefit from outsourcing experiences, plan to expand efforts, Capgemini study shows

Contrary to published reports, a new survey of top U.S. financial executives shows that American companies are not only pleased with the benefits delivered by current outsourcing efforts, they plan to do more outsourcing in the future.  The same study also shows that executives who have outsourced primarily to the U.S. increasingly want options tailored to meeting their business objectives. 

The study of 288 executives, conducted for Capgemini by CFO Research Inc., shows that 72.9 percent of U.S. based companies plan to outsource more functions in the coming years – and 22.6 percent are interested in outsourcing “a broad range of functions and processes” or “everything that’s not core to the business.”

Most respondents said their own outsourcing initiatives met or exceeded expectations by:

• Enabling companies to refocus attention on matters that are core to the business (57.7 percent)
• Improving process speeds (56.1 percent).
• Providing near-term cost savings (55.9 percent)

“Our findings show that U.S. executives understand that the benefits of outsourcing go well beyond cost cutting,” said Chris Carrington, leader of Capgemini Outsourcing North America.  “Outsourcing is a shortcut to business success as companies use it to fuel growth and innovation.  In these competitive times, today's executives are looking for ways to drive benefits beyond cost issues to improve corporate performance and shareholder value and they realize outsourcing is an efficient way to increase competitiveness and improve speed to market and transform their businesses.”

The study also showed that companies want options in outsourcing.  For example, 81.9 percent of respondents said they have outsourced to companies within the U.S., while only 41 percent said they have used outsourcing services in India.  Companies often use a variety of suppliers to handle distinct outsourcing assignments.

“Contrary to popular opinion, companies are extremely careful about the destination of outsourcing efforts,” said Carrington.  “Outsourcing isn’t about finding the cheapest place to do the work, but rather ensuring the work is done well by the right people at the right time.  That’s why Capgemini developed our Rightshore™ approach to outsourcing, which matches our clients’ business goals with the right skills and can be delivered from one or a combination of locations.  Rightshore will simultaneously increase productivity, provide predictability in service and control, while mitigating risk and reducing the total cost of ownership of IT or business processes. “

Executives also said their companies achieved the best results from outsourcing when they actively managed the process – beginning with the careful selection of the best partner for the assignment.  Respondents said they recognize their success with outsourcing depends on their own governance of the process.  They ranked a variety of best practices used in the management of outsourcing relationships.  Some of the top-ranked practices were:

• Impose penalties for poor performance.  Companies that did this “often” were more than twice as likely to meet or exceed near-term cost savings expectations as those that did not.
• Include incentives for excellent performance.  Companies that did this “often” were twice as likely to meet or exceed near-term cost savings expectations.
• Capture and report operating and financial metrics on vendor performance. Companies that did this “often” were 74.3 percent more likely to meet or exceed near-term cost savings expectations.
• Consolidate work with a few strategic vendors.  Companies that did this “often” were 66.7 percent more likely to meet or exceed near-term cost savings expectations.
• Define and document all metrics for vendor performance.  Companies that did this “often” were 53.8 percent more likely to meet or exceed near-term cost savings expectations.

“Since we started this study in 2003, we’ve seen an increasing sophistication about outsourcing and other business issues,” said Carrington.  “Companies are beginning to unleash the power of outsourcing, but realize they must take a disciplined approach and find the right partner to achieve their business goals. 

Full study findings will be released by Capgemini and be available in hard-copy format as well as electronically.