Over the last 40 years the Outsourcing and Shared Services (OSS) market has transformed the way business is conducted. A recent white paper by Deloitte estimated that global spend on OSS in 2018 totaled US$ 688.4 billion and predicted the industry will be worth US$1trillion within the next six years. This staggering rise has been facilitated and driven by the forces of globalization, relentless technological innovation and ever growing opportunities to achieve economies of scale through specialization.
However, there is still some confusion in business about what OSS is, and how best to take advantage of the opportunities it offers.
Simply put – to adopt OSS is to hire a third party to provide a service across a business at scale. The aim is to share accountability and responsibility between the OSS provider and their customers, while driving efficiencies in terms of cost and time. Outsourcing includes both Information Technology Outsourcing (ITO), which accounts for almost 60% of OSS spending in 2019 and Business Process Outsourcing (BPO) which accounts for about 25%.
Examples of ITO would include the day to day provision and operation of IT assets and processes such as end user support, data center management and applications development. BPO involves the ownership and management of specific business functions such as accounting, HR or customer services. Shared services (SS), which scoops up the remaining 15% of industry spend, involves the centralized and pooled operations of back office functions such as procurement, legal and finance, often across multiple organisations.
Traditionally, the growth in the OSS market has been fuelled by cost reduction benefits, mainly through labour arbitrage and the economies of scale derived through specialization.
More recently the benefits of focusing on core competencies, increased agility, improved customer services and scalability are cited by customers as key drivers for OSS adoption. The advent and adoption of new technologies, such as cloud computing, artificial intelligence and process automation have enabled OSS to deliver more strategic and competitive advantage gains. So while cost management remains significant, the ability of organisations to keep up and stay relevant in the modern age of continuous disruption has become equally, if not more important.
Indeed, companies are now looking to create a step change by smart outsourcing. Properly approached, OSS not only offers the chance increase productivity across the board but also lead business transformation programmes, So it’s time for companies around the world to wake up to the benefits, work collaboratively with OSS providers or risk being left behind.