Outsourcing, Benchmarking, KPMG

Response to KPMG survey: Benchmarking more important than ever

In response to KPMG's recent report which revealed that most companies are satisfied with their outsourcing arrangement, yet few can quantify the actual benefits, Richard Edwards made the following entry into the European Leaders in Procurement blog.

KPMG's report on the value of outsourcing has thrown up some fascinating data. Although the majority of companies acknowledge the positive effect their outsourcing service provider has had on their business, very few are able to accurately identify the strategic benefits of their current contracts.

KPMG surveyed 659 companies across the world, with nearly half of all respondents having an annual turnover of over $1bn. Staggeringly, their research claimed 72% of the companies surveyed did not have a benchmark for measuring the success or otherwise of their outsourcing contracts. All of which renders the fact that 47% of respondents felt their outsourcing arrangements contributed positively to their business, as rather meaningless.

With 89% of those companies surveyed suggesting they will either maintain or increase their current sourcing contracts, it seems the need for companies to adopt coherent benchmarking measures of strategic success is more pressing than ever.

KPMG’s research also identified ‘significant’ opportunities for companies to harness the strategic value of outsourcing by assessing current procurement practices, but again it emphasized this was of limited use if the necessary benchmarking measurements were not in place – at present, the survey suggested, 42% of outsourcing arrangements are not currently supported by a formal strategic measurement framework.

Speaking at the launch of the figures in India, Pradeep Udhas, KPMG’s global partner-in-charge, sourcing advisory, commented: “Sourcing is as important as selling for organizations, as it not only impacts profitability, but also makes it much more nimble in today’s dynamic environment.”

It seems then, if companies are really going to reap the benefits of their outsourcing contracts they owe it to themselves and their stakeholders to make sure they are properly benchmarked. Significant opportunities exist for organizations to capitalize on the strategic value of outsourcing, they just need to know where they are.