Trends in Sourcing

Contributor:  Ian Herbert
Posted:  09/02/2015  12:00:00 AM EDT

Tags:   Loughborough | Ian Herbert | sourcing | trends | outsourcing | skills | talent

Interview with Ian Herbert, Loughborough University, School of Business and Economics – deputy Director Centre for Global Sourcing and Services

Question: Which sourcing trends has your research identified?

The SSC/BPO field is maturing, especially in the private sector. The public sector is still lagging but I think will be given a huge impetus in the UK as a result of the ongoing austerity budgets.

The question is no longer ‘should we externalise?’… but how? Or, if not, then YOU need to explain to the board, why not?

Question: Are there any red flags?

A big one is that the SSC sector could become a victim of its own success. Any business that is predicated on ever-reducing cost finds it hard to keep its strategic vision moving forward. Managers can end up without the time or the capability to develop ground breaking new ideas, especially when top management have a view that the shared services project is complete and their attention has moved on.

Question: Which way is the wind blowing? Towards shared services or outsourcing?

The overall trend is still towards outsourcing. But I think we will see a more sophisticated range of in-house/outhouse, onshore/nearshore options for getting work done – the future is fluid, blended, hybrid.

Question: Will SSCs look more like internal outsourcers?

Yes, there will be a greater psychological divide between the core firm and the SSC, especially in the transactional activities. However, many SSCs are not actually using activity-based recharges yet, but this will change.

Question: Why is that?

The emphasis has been on getting change enacted. Corporate boards have been happy to see year-on-year reductions. Optimisation through recharging has been seen as unnecessary or risky but this will change as the standardisation project matures.

Question: Has standardisation got further to go?

Yes, and there are a number of levels. The age old defence of ‘we’re special’ doesn’t hold water any longer. Further standardisation will be around:

  • Across the organisation
  • Across similar industries
  • International Financial Reporting Standards
  • More general consumer-driven IT platforms (ebay  customer customisable).

The drive will be towards standard corporate platforms that enable an organisation to do most common activities in a common way. Now that doesn’t mean to say that there isn’t a need for appropriate customisation, at an appropriate cost, but that those business areas that really do need to do things differently will have to evolve work-arounds to the common systems. The question is, should the division or the SSC do the work-arounds?

Question: What about technology?

I think the technology ‘problem’ is largely solved. By that I mean poor technology used to be an impediment to business as usual, but by and large systems don’t fail in the way that they used to. However, IT capacity and Systems capability continue to advance and there are massive opportunities for business process centres to move towards running on a ‘lights out’ basis, whilst improving service levels and options. Self-service apps will drive this trend and in the process provide massively richer data for business analytics.

Question: Any particular triggers there?

My view is that Windows 10 will offer a more seamless corporate platform for apps between the desktop and mobile devices. At present, mobiles are still more of a personal rather than a corporate issue.

Question: What about talent management?

Here are some of the trends I am seeing:

  • Labour becomes ‘near to free’ –automation will be targeted at high-cost locations
  • Less distinction between functions
  • Functional groups will be led by process rather than discipline based experts – technical skills will become a given
  • Diminishing distinction between sub-fields e.g. financial and management accounting (but also expert specialisation)
  • Business support functions are being: deskilled, automated then moved overseas, leading to
  • An ‘hourglass shaped’ economy in developed (sunset) countries
  • An emerging experience gap, and…
  • Sustainability issues for professional labour forces in developed economies.

Ian Herbert chaired SSON’s European Shared Services and Outsourcing Week 2015. For details of this year’s SSOWeek China, please see below.