An extract from an article by Bhanu Singh and Megha Chawla (Bain & Company) published in Business World
Many firms still haven’t fully realized the promise of outsourcing, even after years of experience. The cost benefits have not been as impressive as anticipated, and service levels have remained largely the same despite being handed over to specialists.
A few companies, however, are learning how to turn outsourcing into a stealth weapon, achieving outsize cost and performance improvements. For example, a US-based healthcare provider worked with its vendor on focused automation in the service desk, such as an analytics tool to figure out the root causes of the most severe recurring issues. As a result, the company dramatically reduced service ticket volumes and improved service outcomes. The cost and performance benefits were significantly greater than in traditional outsourcing, where benefits result from arbitrage and basic automation.
Such “transformational sourcing” delivers up to 25% improvement in functional total cost of ownership, over and above the benefits from traditional sourcing. These improvements result from process redesign, digitalization and automation over the course of an outsourcing engagement.
In addition, some companies have adopted more flexible pricing models, where cost depends on consumption and outcomes, thereby turning fixed costs into variable costs, and more important, sharing accountability with vendors for a defined set of operational and business outcomes. At one health insurer, operations outsourcing vendors signed up to spur improvements not only in operational metrics, but also in customer and provider Net Promoter Score® (a key metric of loyalty). Performance improved through work redesign, automation and other technology interventions.
As we look across industries and regions, several common problems hinder sourcing programs from achieving their full potential.
- Outsourcing, Insourcing, and Right Sourcing in eDiscovery
- NPS: You May Want to Know More About This Important Number