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The future of outsourcing

15th of December 2015 Article by Peter Ankerstjerne

Last month ISS, IAOP Nordic Chapter and the Copenhagen Institute for Future Studies (CIFS) held ISS Business Forum: the future of outsourcing and perspectives for FM. This took place at what has been called the most effective workplace in the world, according to the Leesman Index - the ISS headquarters in Søborg. In his latest ECJ blog, Peter Ankerstjerne, ISS head of group marketing shares the key trends and takeaways from the insightful discussions of the day.

Under a huge impact of technology, new market demands and business propositions rooted in relationships and outcomes rather than transactions and inputs, the outsourcing market is experiencing a transformative development.

Smaller contracts but higher demand

In today’s outsourcing market, small to moderate-sized deals have become the order of the day, whereas mega deals are fewer. The nordic chapter chair for IAOP (International Association for Outsourcing Professionals), Katie Gove explains:

“We are seeing smaller contracts, judged by dollar amounts. But we are definitely seeing more of them. In fact, the overall pool of client organisations (those companies buying outsourcing) is growing. Outsourcing is now something that smaller organisations are using whereas 10 years ago, client organisations were mainly large companies only. So the total contract value is larger now than it has been even though contracts themselves are generally smaller.”

Gove adds: “We understand this development to show that client organisations are stepping into the service integration role, that is, they are assembling a portfolio of vendors and technology and are orchestrating the outcome of the environment. This is a change in the market. Ten years ago, companies were mostly buying outsourcing on a functional level in a 'black-box' format. This meant that the vendor did all the integration and that there was little transparency for the client organisation.”

Relationships and outcomes rather than transactions and inputs

During the business forum I talked about another significant trend in the outsourcing market - that companies increasingly are moving from input-focused outsourcing models towards outcome-focused outsourcing models.

Input-focused models have traditionally been based on predetermined resources within a specific time frame at an agreed price, for example working hours and delivery.

In the coming years however, the trend shows that organisations will lean more towards service provisions based on output specifications. Using output-based outsourcing, the outsourcing company specifies what it wants and moves the responsibility of determining how and what gets delivered to the service provider. Think about it, why dictate procedures in an area where you have decided you are deficient? It must be up to the service provider to understand how to put the supporting processes together to achieve the desired outcomes.

To make this work, closer collaboration with the client organisation will be necessary. Both parties (the outsourcing organisation and the service provider) need to be willing to change and adapt both their way of thinking and practices for the common good.

Creating trust will be paramount in order to create an outsourcing success, and constant focus on mutual business transparency may very well be the way to get there.