Outsourcing, Institute, Casale, Outsourcing 2.0

Outsourcing 2.0: An Interview with OI's Frank Casale

30 Aug 2007 | (Interview)

OUTSOURCING 2.0:

An interview with the Outsourcing Institute’s founder Frank Casale on what he calls “the new outsourcing”

Is outsourcing poised for revolutionary change?  Outsourcing as a business model has evolved continuously and incrementally over time.  Now, some experts are pointing to a coming revolution.  The same elements that have moved the web to what people are calling web 2.0 may now do the same for the outsourcing business model.

In response to these changes, the Outsourcing Institute underwrote a landmark research study to uncover the sources and methods driving this new level of rapid change.  After reviewing the summary findings, the SharedXpertise Bulletin met with OI’s founder and lead guru, Frank Casale, to hear from him about the future of outsourcing 2.0.

SharedXpertise Bulletin:  How did OI go about its research for this study? 

Frank Casale:  There is a lot of misinformation and disinformation in this space. I knew that in order for this research to be significant and to provide value we would have to access a large portion of the global outsourcing ecosystem, and we would need to leverage several different methods, since I do not fully trust any individual one approach.

We surveyed our entire global membership – just over of 70,000 people – in a variety of ways over a two-year period. We did web-based surveys, telephones interviews, face-to-face interviews and small focus groups. I wanted to get a real sense of what the state of outsourcing is: the wants, the needs, the pain points, as well as the opportunities and the breakthroughs. We surveyed the buyers as well as the service providers. The resulting data we compiled was eye opening, even for someone as jaded as me, who has been at the center of the marketplace 24-7 for over 14 years. 

SB: What were the results of this research?

FC:  You have to realize that the original intent of this research was for internal use only, to aid in the development of the new online outsourcing community and marketplace that we are launching in mid-September. We wanted to get a sense of what features and content would help outsourcing buyers better procure and manage their many engagements and help service providers more effectively market, sell and manage their outsourcing engagements. I wanted to make their jobs easier and their outsourcing more successful. I felt that there was a gaping hole of needs that could and should be satisfied by OI. We have the network, the neutrality and a heritage of innovation and risk taking.

I believed I knew these answers already – I had a vision – however I was advised by my board to do this research just to make sure we did not miss anything.  And, although much of the data was right in line with our assumptions, there was a good amount that we learned and one big overarching theme or message that began to emerge from the market feedback. That message is that although much has changed in outsourcing and in the world in general in the 14 years since I founded The Outsourcing Institute, most people are doing things the same way and wondering why the process is painful and their results are mediocre, if not disappointing, as compared to their expectations. The approach, the methodology and the business models of most buyers, vendors, consultants and attorneys are still stuck in 1993.

SB: What were the main pain points?

FC:  Most on the buy and sell side seem to agree that the outsourcing process takes too long, costs too much money, and requires more bandwidth and skills than they necessarily have in house. The process by which buyers and sellers find each other is archaic and extremely inefficient.

SB: Any other big findings?

FC:  Yes absolutely: the growth of the do-it-yourselfer (DIYer). DIY outsourcers – those seeking to procure and manage their outsourced relationships without the support of traditional advisors – make up the majority of the client side of the marketplace. This creates a whole new transaction dynamic and an entirely new array of needs and services. There are still many companies hiring expert advisors; there always will be. However, without most of us realizing it, an entirely new segment of the marketplace has sprung up.

Contrary to what you might think, DIY outsourcing is not limited to small and mid market companies; it’s taking place in all companies. As Fortune 500 buyers become more outsourcing savvy and the average outsourcing deal shrinks in size and scope, the majority of these deals are being transacted and managed without third party assistance. DIY outsourcing is growing and is here to stay.

It also is apparent from our findings that relationship management is what will differentiate between success and failure; in my white paper I refer to it as outsourcing’s new Holy Grail. If you do not have world class relationship management as a core competency and as key component of your outsourcing process – as a buyer or service provider – please stop reading this and start making the necessary commitments and investments today.

SB: What was the genesis of outsourcing 2.0?

FC:  While pouring through this data I was simultaneously immersing myself in the web 2.0 world in an effort to best serve our members with the new portal we were creating. Suddenly one day it hit me that web 2.0 is just what the doctor ordered for outsourcing. If you look at a checklist of what the web 2.0 enables – for example greater collaboration, taping into collective wisdom, greater access to information and better communication among virtual teams – you realize this new web is just the thing to get outsourcing from 1993 and fast forward it to 2013. The impact this would have on our world would be significant. As I thought about the intersection of outsourcing and web 2.0, I realized that this was just the upgrade that outsourcing needed, and I called it outsourcing 2.0 – the new outsourcing. The response to my recent white paper on outsourcing 2.0 is a clear indication that this is real, it is necessary, and it is timely.

SB: You have talked about the need for best practices and standards. What areas do you see these developing in and how should/will these be developed and distributed?

FC:  To date, best practices have been kept under lock and key by most individuals and organizations. This needs to change in what is becoming an open economy. I know it’s counterintuitive to many, but organizations will succeed more and more through sharing, not hoarding, experience and expertise. Don Tapscott’s book, Wikinomics, makes the case for this argument.

As far as standards go, in essence there are none right now. I know the HROA has begun some work in this area with its Standards & Practices initiative, but we have a long way to go and we need them across the board. From procurement to transition to governance, there is just too much trial and error taking place. It’s inefficient, and it’s dangerous for companies and careers. Just think of the positive impact a standard outsourcing RFP would have on the time and cost of a typical transaction. Both the buyer and service provider would greatly benefit.

As to where standards emanate from I would say organizations likes ours [OI], yours [SharedXpertise and the HROA] and others.  We need to look at creating a process for developing a path to industry-accepted standards. It may take a lot of coffee and Red Bull but it is doable and it is about time.

SB: You seemed to indicate the rise of outsourcing as a career. How do you see the career path forming and evolving for the outsourcing professional?

FC:  Ten years ago I predicted that outsourcing would become a full-time job for many. I coined the term Chief Resource Officer as the epitome of this role. It was apparent to me that as more companies did more outsourcing someone needed to lead the charge to procure as well as manage an ever growing portfolio not just of contracts but of relationships. Although they use many different titles, many Fortune 500 companies already have in place one or more people in this role.  The good news is that, thanks to CRO-type leadership, companies will achieve greater ROI from outsourcing and those with outsourcing experience will finally begin to have a career path. Skills most in demand these days are outsourcing relationship management and experience with business process outsourcing.

SB: Please share some specific examples of how web 2.0 will impact and shape outsourcing 2.0.

FC:  It’s primarily about access. Greater access to best practices, interactive tools, pricing, buyers, vendors, etc. It’s also about individual enablement and a more efficient marketplace.

SB: We’ve seen mid-market companies take increasing interest in outsourcing. How will outsourcing 2.0 make life easier for mid-market buyers?

FC:  The challenge for most mid market companies is that they are big enough to experience the challenges that many companies face yet not big enough to be able to justify the in house or outside resources required to procure and manage an outsourcing engagement.

Thanks to the leverage and the enablement made possible by outsourcing 2.0, these mid tier organizations can do just about any outsourcing deal that a global Fortune 500 organization can do. Outsourcing 2.0 as a great equalizer is great news for these companies.

Click here to download the Outsourcing Institute's report  Outsourcing 2.0.

Visit the Outsourcing Institute at www.outsourcing.com.

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