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Outsourcing Leads to Talent Paradox

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Cost savings is your grandfather's outsourcing model. Today, companies are using outsourcing to gain access to higher levels of skills and business acumen while still enjoying the advantages of labor arbitrage. The hitch in this scenario is that neither the client companies nor the outsourcers are investing enough in this talent of tomorrow.

The outsourcing industry is failing to invest in the skills needed to capture the full value from outsourcing engagements, according to a study sponsored by Accenture, a management consulting company.

Two strategic business skills are increasingly important to enterprise executives: influencing executives and defining business objectives beyond cost reduction (77 percent) — outsourcing's old stomping ground.

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 or skills in analytics and relationship management.

This failure to invest has created a "talent paradox." Outsourcing is moving from the back office to the middle and front office, where value creation is paramount, and buyers are seeking more sustainable business outcomes beyond merely cost reduction. However, 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 of business process outsourcing at Accenture. "The 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 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. These are some of the key recommendations to remedy the talent paradox:

  • Focus talent investments to enhance core business skills. Enterprises that have outsourced successfully have invested in external experts who have skills beyond operations management, procurement and service-level measurement. Over time, these businesses 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 can improve their core businesses.
  • 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. These 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 to meet business needs as necessary.

Reach BusinessNewsDaily senior writer Ned Smith on Twitter @nedbsmith. Follow us on Twitter @BNDarticles, Facebook and Google+.

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Business News Daily was founded in 2010 as a resource for small business owners at all stages of their entrepreneurial journey. Our site is focused exclusively on giving small business advice, tutorials and insider insights. Business News Daily is owned by Business.com.