KPMG finds that the era of mega outsourcing deals might have come to an end
In the past decades, we have seen a proliferation of mega outsourcing deals (100+ mUSD) in the Nordics.
As we move towards 2020, organisations will continue to struggle with attracting and retaining talent alongside an increased appetite for multi-sourcing. This begs the question: is the era of mega outsourcing deals coming to an end?
By Geir Alexander Talseth, Director, KPMG Norway
Multi-sourcing offers access to global talent pools
Both service providers and Nordic advisors provided us with the top expected initiatives for organisations in the upcoming year. From the responses we received, top initiatives involve investing in new technologies, which require organisations to rethink how they use the outsourcing market. Organisations need to exploit the competitive advantage of individual partners though multi-sourcing to ensure access to a vast set of talent pools, and promote competition among them.
Talents are not in the cloud
The challenge of attracting the necessary talent to leverage new technologies has been a key trend over the past few years, as organisations prioritise and seek to capitalise upon cloud services, robotics, artificial intelligence as well as data and analytics. Exploiting these novel opportunities is difficult without the right talent and organisations are hard-pressed to fulfil their human resources needs. 73 percent of the service providers and Nordic Advisors agree that organisations lack adequate and skilled talent, citing the inability to attract and retain talent as their biggest obstacle to undertaking their top initiatives.
Talents are not in the cloud – organisations must tap into talents across the globe through partnerships with third parties and service providers if they want to drive change and innovation. That’s why organisations are increasingly adopting multi-sourcing strategies with a focus on accessing top talent. The key to success is having the market knowledge required to attract talent at an affordable price.
One could argue that mega deals are alive and well
At the same time, there is evidence suggesting the era of mega deals is alive and well. Our study reveals that organisations use the outsourcing market to drive down operation costs. The continued emphasis on costs and the renewed growth in outsourcing investments could indicate the number of mega deals is only slowing down rather than diminishing.
The first-hand experiences of organisations dealing with the complexity of multi-sourcing support this view, especially in cases of mismanagement where increased vendor and service management and overhead costs are often found. Putting all one’s “eggs” in one or a few baskets could be a risky strategy from a flexibility, vendor locking-in, and competitive pricing perspective. The challenges associated with multi-sourcing must be duly considered by organisations.
Entering the talent-based multi-sourcing era
The increased use of cloud services and new technologies requiring domain specific knowledge necessitates that organisations attract and retain new talent. To date, however, organisations have not managed to meet their own needs. This obstacle will significantly reduce the number of mega outsourcing deals and will require that organisations multi-source to realise their top initiatives, while remaining cost-effective.As we transition to this new era of talent-based multi-sourcing, it is important for organisations to evaluate their use of multiple third parties and service providers, optimising their deployment and proactively addressing associated challenges. As such, KPMG finds that the era of mega outsourcing deals has, indeed, come to an end.