Outsourcing slowdown?

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A recent report from TPI shows a slowdown in the signing of outsourcing deals .

According to the report new outsourcing contracts in Europe fell from 75 to 56 in the 2nd to 3rd quarter of this year and the only one significant mega-deal was signed during the 3rd quarter. This has got people within the industry wondering whether we are about to see the decline in outsourcing contracts as more end users keep a close eye on the bottom line, maybe bring services back in house or just don’t do anything at all.

Despite TPI’s reports, I don’t believe organisations are going to turn their back on outsourcing altogether. Instead we may see a change in the nature of outsourcing deals.

In the past couple of years the ‘mega-deal’ has been consigned by many to the outsourcing scrap heap in favour of multi-sourcing that is choosing separate suppliers for different processes.

This has allowed smaller, more specialised service providers to step into the limelight. However, with the focus moving back onto cost as the main deciding factor in outsourcing, having one outsourcing supplier will minimise management, due diligence and supplier selection costs. It should also provide the end user with savings achieved by buying in bulk. So maybe we are seeing a pause as mega-deals, generally, take some time to set up?

As more and more organisations come to grips with the credit crunch, we will see outsourcing move to the top of the boardroom agenda. Outsourcing has always been associated with cost savings and now with all companies setting aggressive cost saving targets for next year we may see more and more outsourcing contracts come to fruition.

But in the long term cost isn’t the only parameter; other factors such as relationships, transparency and growth start to become important. Responsible suppliers will know that and try to build value for their customers, because there is one thing that is sure about entering a recession; eventually you come out!

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