Collaboration Is Key to Effective Outsourcing

Success in today's complex outsourcing marketplace depends primarily on a highly collaborative client-service provider relationship, according to a 2007 PricewaterhouseCoopers (PwC) Global Outsourcing study, Outsourcing Comes of Age: The Rise of Collaborative Partnering.

The study explores

A key finding: Many top global executives say they gain major competitive advantages from outsourcing. The CEOs, in particular, described the growing importance of collaboration with suppliers and service providers as a way to mitigate complexity, reduce transaction costs and gain competitive advantages.

Overall, the survey identified functions now being comprehensively outsourced, including human resources, information technology, production, logistics and distribution, sales, and finance.

A large majority of clients--87 percent--say outsourcing delivers the benefits projected in the original business plans. Outsourcing is perceived as such an essential business practice that 91 percent of clients, whether completely happy or not, said they will outsource again.

"Outsourcing is still very much the game, but the rules have changed," says Pat McArdle, global outsourcing partner at PwC. "The lightning pace of growth in outsourcing is only matched by the transformation of the market as traditional models are gradually being replaced by multi-sourcing, joint ventures and 'best of breed' arrangements."

Managing this extended network of relationships, McArdle adds, "requires more transparency, better communication, greater trust and genuine reciprocity. In a nutshell, success in this environment will heavily hinge on shifting the client-service provider relationship from adversarial to collaborative, from one based on procurement to one grounded in partnership."

Collaboration Pays Off

Collaborative partnering and an openness to business model innovation become more important as clients start to look at "second wave" outsourcing of functions being streamlined within shared service centers, such as HR and finance or accounting.

Companies identified as "expert outsourcers" (those that met their business plan goals completely) measured their service providers as better collaborators than "learners" (companies for whom outsourcing only partly met business goals), with 81 percent of experts stating that they have honest and transparent dealings with providers (vs. 62 percent of learners).