Chapter 12: Transformational Outsourcing Horizons

Overview

Companies have had a terrible track record for implementing change. Seventy-five percent of major change initiatives, 70 percent of mergers and acquisitions, and 50 percent of alliances fail to meet expectations. Poor execution is widely recognized as the culprit. In a 2002 Harris poll of more than 300 major U.S. corporations, 66 percent of CEOs said leaders’ skills at execution had to be improved ‘‘a great deal’’ for their companies to be successful in the coming decade. In fact, execution skills ranked second only to the ability to think globally on the ‘‘needs improvement’’ list.

Every industry has its own tectonic pressures that raise the ante. Whether they are facing globalization, industry deregulation or consolidation, increasingly demanding customers, disruptive technologies, or a fiscal chokehold, organizations must learn to make and absorb changes faster than ever before.

Most organizations have used outsourcing in some way. A 2003 survey puts that count at about 70 percent in the United States.^[1] But only a select group of leading executives have recognized that outsourcing can be used to accomplish enterprise-level, transformational change. This small group has proved that organizations can make big strategic moves reliably and quickly with this approach.

We can expect to see transformational outsourcing grow. A 2002 survey conducted by the Economist Intelligence Unit found that more than 50 percent of the 232 global executives surveyed agreed that their organizations would need radical change over the next three years, and 75 percent of these were willing to work with a partner to implement it.^[2] A 2003 Wall Street Journal survey of 325 U.S. executives goes further. Fifty-nine percent of these executives anticipate extensive change in their organizations over the next three years; 71 percent are already using outsourcing; and the vast majority expect to increase their use of outsourcing (see Exhibit 12.1). More than half recognize that outsourcing makes an organization more flexible, and 54 percent agree that it is an effective way to implement organizational change. The larger companies and the more experienced outsourcers dominate these groups.^[3]

Exhibit 12.1: Executives expect to increase their use of outsourcing.

The conclusion? As they get more experience with outsourcing, executives are learning the tool’s potential, and they are beginning to wield it for more strategic purposes. They won’t be waiting for their organizations to hit the skids; they will be proactively shaping and reshaping their business models.

^[1]Unpublished Accenture survey of 325 U.S. executives, January 2003.

^[2]Unpublished survey conducted by The Economist Intelligence Unit, and sponsored by Accenture.

^[3]Unpublished survey sponsored by Accenture.