“Talent paradox of outsourcing” Research finds lack of investments in talent limiting high performance in outsourcing

NEW YORK AND LONDON (April 10, 2013) – The outsourcing industry is failing to invest in the skills needed to capture the full value from outsourcing engagements, an HfS Research study, sponsored by Accenture, reveals. The report, entitled ” Is Good Enough Really Good Enough? The Great Talent Paradox in Outsourcing ,” confirms that in order to achieve sustainable value beyond cost reduction, both buyers and providers of outsourcing must increase their focus on developing talent.

According to the report, which featured a survey of executives from 282 enterprises, two examples of strategic business skills are increasingly important to enterprise executives: defining business objectives beyond cost reduction and efficiency (83 percent regarded this as important or critical) and influencing executives (77 percent). However, executives acknowledge that their current skill levels are deficient in these areas. Barely a third of enterprise outsourcing customers believe their current governance talent – the people responsible for managing the service relationship – can drive innovation or define business outcomes. And only about half of outsourcing providers have established formal training programs to develop industry expertise and skills in analytics and relationship management.

This failure to invest has created a “talent paradox.” As outsourcing moves from the back office to the middle and front office, where value creation is paramount, and as buyers seek more sustainable business outcomes beyond merely cost reduction, neither buyers nor providers are making the necessary investments in the key driver of value creation – people.

“If outsourcing is to deliver on its full potential, buyers as well as providers need to invest in developing the skills and talent to capture the greater levels of value available from fourth and fifth generation BPO solutions,” said Mike Salvino, group chief executive, Business Process Outsourcing, Accenture. “The HfS Talent study – the first of its kind – highlights the growing talent gap between what the industry and its clients aspire to achieve and the lack of sufficient investment in people to make it happen. We hope it serves as a call to action for everyone involved in the business of outsourcing.”

The research illustrates that the majority of enterprises’ outsourcing governance teams are comprised largely of procurement professionals, contract negotiators and project executives who are not learning the necessary skills to shift their focus from tactical project management to strategic business alignment. Enterprise leaders have set up their governance teams to fulfill tactical demands in the early phases of outsourcing to mitigate risk, but fail to develop the necessary strategic business skills as their engagements mature and their needs move beyond managing tactical operations. The root of the paradox is that too many enterprise leaders are not focused enough on talent development and consequently leaving a substantial amount of value on the table.

“To be successful at achieving maximum value from outsourcing, enterprise outsourcing executives need to work collaboratively with their service providers to create an environment of learning and innovation, in addition to operational excellence,” said Phil Fersht, CEO and founder, HfS Research, and author of the report. “A quality outsourcing provider should deliver the appropriate talent, technology and process acumen, but this will only reap rewards when the ambitious outsourcing buyer can work with their provider to define business outcomes together and forge a realistic path to achieve them.”

The research study shows that the keys to improvement in outsourcing initiatives lie in refreshing the talent pool available to enterprises – not only their own internal talent, but also the talent from the service provider. Some of the key recommendations to remedy the talent paradox include:

Focus talent investments to enhance core business skills. Enterprises that have been successful with outsourcing invested in external experts with skills beyond operations management, procurement, and service-level measurement. Over time, they have developed a good number of operations managers in-house, and their service provider excels in these activities. Such companies are now investing instead in skills that improve their core business.

Access the strategic talent of service providers. Operational capabilities are now routine and are no longer true differentiators when a buyer is choosing a service provider. Service providers should invest in developing the methodologies, analytics, and talent that are instrumental in creating value beyond cost reduction, and buyers should evaluate potential providers against these capabilities.

Revamp skills expectations for the existing team. Successful enterprises have looked for strategic skills by redefining the job competency models of individuals managing service providers.

Establish shared ‘stretch’ goals to encourage skills development and usage. To prevent the outsourcing relationship from plateauing, enterprises and their providers should jointly review goals, metrics, and objectives regularly and re-position solutions as necessary to meet business needs.

“The bottom line is that outsourcing business or IT functions is never ‘done’ and with proper investments in talent, the outsourcing governance team has continual opportunities to improve productivity, efficiency and access to critical data,” said Salvino.

This report extends from a seminal HfS report; A Blueprint for the Industry Known as Outsourcing, which identifies the four core industry challenges and the collaborative behaviors that enable clients to capture the greatest potential value from outsourcing.

To learn more about HfS Research, please email insights@HfSResearch.com.

To learn more about Accenture’s research into High Performance BPO click here.