Outsourcing: The shift toward smaller, specialised and standardised deals
by Andy Jones, director and general manager, Large Enterprise, Xerox Europe
Saturday, July 28, 2012
The outsourcing market is booming. According to the ISG Global TPI Index, 2011 was a record-breaking year with 870 contracts awarded across the outsourcing market worldwide, well above the average for the past five years.
Look closely at this expansion, and you’ll notice an interesting but subtle shift taking place. The TPI Index also highlights that small to mid-size contracts valued at £63 million or less have more than tripled and are playing an important role in the outsourcing market, which is expected to grow overall by three to four per cent in this year.
Two key reasons seem to explain the move to smaller deals.
In our experience at Xerox, the first reason is the increased adoption of outsourcing by small to medium businesses (SMBs); signifying a broader acceptance of the benefits of outsourcing and leading to a significant increase in smaller, specialised agreements in this market.
The second reason is historical. Ten years ago outsourcing represented an exciting, new opportunity for customers to overhaul business functions through leveraging partners’ expertise and finance. We saw a spate of huge projects being outsourced to one provider as an act of faith. Many a CIO, as those who lived through the days of the multi-million dollar single-provider deals will remember, had their fingers burnt when deals didn’t live up to expectations.
Outsourcing deals become less complex for customers
Businesses have become savvier in the way they approach outsourcing. Executives and managers think carefully about what they outsource and why, and are building stronger outsourcing models based on historical lessons in achieving ROI. As a result, businesses today take a more segmented approach to outsourcing investments, breaking them down into bite-sized chunks. Today we’re seeing towers of outsourcing – Customer Relationship Management (CRM), Human Resource Outsourcing (HRO), and Information Technology Outsourcing (ITO).
We’ve also seen more standardised offerings, for example Business process as a Service (BpaaS). With BpaaS the focus changes to the end service, with businesses basing their agreements on Service Level Agreements of deliverables. This enables providers to offer a standardised process to customers which keeps the cost down as the service provider is working the same way for all its customers. For this reason we believe BpaaS offerings are great for small to medium businesses (SMBs).
A few years ago we saw a gap in the market for a standardised managed print services offering, which could be scaled to meet the requirements of different sized businesses, especially SMBs. So we established Xerox Print Services (XPS) which applies the same MPS tools and techniques Xerox uses to save millions for large corporations to companies with a less complex print infrastructure so they can reap the benefits of MPS.
Newport City Council (NCC) is a Xerox customer that has benefitted from XPS. NCC has cut its print-related costs by more than 25 per cent, resulting in nearly £90,000 savings. More than 3,000 NCC staff can now print and collect documents, scan to email, or network to any device across the council’s 50 sites, helping improve efficiency and security, and reducing waste.
The take-up of outsourcing amongst SMBs, coupled with the growth in supplier expertise is driving innovation and bringing new standardised offerings to market. We’d advise that when considering this type of solution, organisations work with providers that are experts in their field. In a time when organisations are continuously scrutinising the bottom line, we believe standardised solutions will increasingly prove a popular choice for executives and managers seeking a quick return on investment driving a fast payback whilst supporting the business with dependable service delivery.