Strategic Sourcing Europe

PricewaterhouseCoopers (PWC) just released the outcome of their new survey (2007) about outsourcing, based on US/UK client mainly . Straightforward, clear, worth reading I feel. If the tag-line is nothing surprising at all (we all recognise that collaboration is more powerful than simple ordering), the dimensions of the analysis executed by Pat McArdle and his Outsourcing team from PWC are valuable. Here is the magic link to the free-to-download report: Outsourcing comes of age:The rise of collaborative partnering*, where you will learn why successful outsourcing no longer simply entails a buyer and a supplier but requires a new model of outsourcing: collaboration.

Although you will be able to go through an executive summary, available in the report, below are my personal top 7 learnings which underline how much Outsourcing is alive and well, maturing into collaborative partnering when complex:

• Top reasons firms outsource are to: Lower costs (important or very important for 76% of respondents); gain access to talent (70%); Farm out activities that others can do better (63%); Increase business model flexibility (56%),
• Information technology services remain the most widely outsourced activity, reported by 57% of respondents but overall, 70% outsource one or more inherently strategic activities: 53% outsource production or delivery of core products or services; 33% outsource sales & marketing (including third party distribution channels); 32% outsource innovation/R&D
• A large majority of customers (87%) say today’s outsourcing delivers the benefits projected in the original business plan,
• 66% of customers say that social and environmental issues will have a significant impact on their offshoring decisions.
• 91% of customers, whether completely happy or not, said they will outsource again,
• 81% of companies identified as “expert outsourcers” (those who met their business plan goals completely) measure their service providers as better collaborators versus 62% for the “learners” (companies for whom outsourcing only partly met business goals).
• 50% of surveyed companies expect to increase multisourcing and 45% plan to increase
  their use of joint ventures. The even newer approach – open, public and collaborative business models – is on the rise for a surprising 35% of respondents. Meanwhile, the traditional ‘retail’ business to business model – frequently changing supply networks – is in retreat, with only 14% planning to grow this approach.

To conclude, I would quote Pat McArdle who said: “Managing this extended network of relationships requires more transparency, better communication, greater trust, and genuine reciprocity. In a nutshell, success in this environment will heavily hinge on shifting the customer-service provider relationship from adversarial to collaborative; from one based on procurement to one grounded in partnership.”