Major Outsourcers Claim Innovation is Key to Outsourcing Success

DALLAS, June 4 /PRNewswire/ -- At the first annual Alsbridge Outsourcing Leadership Provider Forum held in Dallas, representatives of the leading outsourcing providers offered up their concerns over margin pressures, offshore strategies and the need for innovation. The event included a collaborative session following the Alsbridge proprietary Sourcing Alignment Session (TM) methodology and will result in a new report to be available later this month. Participants included ACS, Accenture, IBM, Capgemini, Cognizant, EDS, ExcellerateHRO, EXL Service, Getronics, HCL, Hewlett-Packard, Infosys, Luxoft, Perot Systems, T-Systems, Virtusa and Wipro.

The SAS process is used by Alsbridge in a sourcing engagement to identify issues and gain consensus on decisions. During the event, process was used with the attendees to collaboratively identify significant challenges and issues facing the outsourcing industry at large as impacting both the client business side and providers' profitability. The process yielded a strong message highlighting the need to find better ways to generate innovation in outsourcing, address the decline in margins of providers as a long-term issue, and improve the sourcing process, contracting, and governance strategies.

"We asked the leaders in global outsourcing to identify the biggest challenge facing the industry," said Ben Trowbridge, president and CEO of Alsbridge. "They said that innovation was expected by clients but lacking, while at the same time that margins have shrunk leaving little capacity to fund innovation."

During the collaborative sessions, the providers said they hear talk about innovation yet the sourcing process and priorities seem to favor decisions based on cost/price and risk mitigation. The buyers push the providers towards commoditization or level playing field approaches that inhibit or prevent innovation. Service levels and performance expectations are not focused enough on business results. Clients often lack C-level attention essential for engagement and innovation, and the client governance approaches are frequently "wrong-sized" or misaligned by either retaining too many micro- managers concerned about activity rather than results, or by not adequately leading client internal change management and priorities.

"One problem is that when providers include change management services in their offers they are frequently forced to remove those offers from scope in order to win a deal," said Barry Weiss, managing director, Alsbridge.

Providers also candidly revealed many of the internal challenges they face and their own contributions to problems in outsourcing. They identified that they struggle to keep pace with technology changes as well as face challenges in meeting global needs for staffing and talent resources, including at the senior account relationship level. Lack of experienced provider-side talent at the client-facing, account level, as well as account leader turnover, contribute to problems.

"During our SAS session, the providers were in agreement on a number of key issues," says Weiss. "Global sourcing challenges for providers include competition for talent, the need to hunt out and gain acceptance for new global delivery locations, and how to structure deals to fairly share global currency, global inflation and geopolitical risks."

Within the deal and sourcing process, providers did not identify any positive contribution to innovation coming generally from either advisors or external counsel. The providers made clear that they would like to see sourcing processes with better ways to achieve mutual alignment of realistic expectations, in a collaborative environment allowing open dialogue with their customers, thus creating more trust. Providers hope for a sourcing process that costs less, takes less time, and focuses better on real business issues. They would also like to see a process that does a better job of setting a framework for effective post-contract change management.

"At Alsbridge, we pride ourselves on working with clients in processes that cultivate innovation and collaborative relationships of trust even as we drive many aspects of sourcing engagements through a time-tested, proven, repeatable and comprehensive methodology that leads to strong deals and optimal pricing and solutions," says Trowbridge. "The SAS brings the best elements of collaborative, strategic planning to the front-end of sourcing projects."

During the event, Alsbridge also introduced its new innovation in assessing the viability of outsourcing contracts and relationships. The Alsbridge Market Reality Assessment (TM) or MRA can quickly score either an existing outsourcing contract or one in negotiation on over 150 common terms and elements. Alsbridge Managing Director Steve Kopp explained, "We built the MRA to help our clients bargain for favorable terms, but we can more intelligently focus our efforts on elements having more leverage so that the bargaining process enhances trust rather than strains it."