Cut price outsourcing complicates value drive

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Cut price outsourcing complicates value drive

Continuous improvement methodologies like Six Sigma are being written into the management structures governing outsourcing contracts in an attempt to forge closer ties between the parties involved.

As part of a whistlestop visit to Sydney, the chairman of the International Association of Outsourcing Professionals, Michael Corbett, added his voice to recent calls for more collaborative engagement models with outsourced partners.

He said the development and implementation of overarching management structures were critical to shedding the ‘blackbox' image of outsourcing.

The ‘blackbox' nature of some outsourced arrangements infers that companies give over their requirements and receive back an end product from the outsourcer but are prevented from knowing the mechanics of how it was developed and by whom.

"That mood is changing," Corbett told delegates at an Australian Institute of Company Directors breakfast earlier today.

"In these economic times it comes back to how we treat relationships.

"Are we going to treat them as expendable and drop back into a protective mode, or see an opportunity to make stronger investments in these relationships and drive more value out of them?

"I can tell you the consistent message we hear from executives is they want to drive more out of relationships. They see people adding value to the business every day but want to know how to get a bit more value out of each."

The only way to drive additional value from outsourced relationships is to forge closer ties between companies, Corbett said.

However, this may be complicated by the fact that innovation isn't the only "value" that organisations want to drive through their outsourced deals.

Corbett said that outsourcing was being conducted "against a different economic backdrop to a year ago".

"We see a lot of downward pressure on pricing," Corbett said.

"There's going to be some tough negotiations [ahead]."

Uncertainty is also pushing companies to seek more flexibility within their outsourced arrangements.

But Corbett still believed joint innovation would remain on the agenda.

He also highlighted the scale of opportunity for the business community to outsource non-core parts of their business.

"At the risk of sounding like a hammer, everything looks like a nail," Corbett said.

"When you look at the complexity of the environment we operate in and the scale of knowledge and technology investment required, there's not a single thing businesses do today that isn't a specialty."

Businesses will continue to find it tough to attract and retain "the best talent in world in each of those areas", making outsourced skills attractive, he said.

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