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Deloitte Global Outsourcing Survey 2020
Our 2018 report centered on the theme of disruption, and 2020 has raised this to a new
level. COVID-19 has been one of the most disruptive events in a generation; and the impact
is still being felt, not only across the global economy but also across the huge amount of
outsourcing relationships in place.
Our biennial survey has been the cornerstone of our research into the outsourcing market
for over a decade. This year, we adopted a more intimate approach. Instead of releasing
an online survey, we interviewed 40 executives across our clients, service providers, and
lawyers globally to bring a more complete perspective to our findings. The interviewees
were spread across the Americas, Africa, Europe, Asia, and Australia, giving us a global view
of the outsourcing ecosystem. The interviews were conducted both before and after the
start of the COVID-19 pandemic, enabling us to identify how the industry has responded.
There are difficult decisions ahead. Should we continue to invest in bold ideas for major
transformational changes or invest in those capabilities that protect the business in the
face of economic uncertainty? How much more disruption can we take?
We have produced this report by interpreting and analyzing the insights generously shared
by our interviewees, coupled with our own extensive insights from working with clients,
service providers, and lawyers over many sourcing contracts. We are always interested in
seeing your take on our report and we look forward to having this discussion with you.
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Deloitte Global Outsourcing Survey 2020
Introduction
The outsourcing industry continues to embrace
disruptive technologies, breathing new life into a
mature but critical driver of the economy. However, the
uncertainty created by COVID-19 has instilled caution,
as everyone in the industry adjusts to the disruption
caused by the pandemic.
This report provides insight into how Cloud and RPA are table stakes now. however, this function is still underpowered
the latest trends in outsourcing are It is no surprise to see cloud and RPA in many organizations. Clients need to
dramatically reshaping the industry. In solutions as being core to most new invest more in building their supplier
addition to the direct takeaways from the outsourcing transactions. In fact, as management capabilities to manage the
2020 interviews, we also follow up on our they become more proven and familiar, new normal and achieve maximum value
2018 survey to understand whether the they are less of a driver than two years from their service provider ecosystem.
trends we predicted two years ago have ago and considered “table stakes” for
actually emerged. On the whole they were all transformations. Organizations are Agility is critical.
emerging…before the world changed as we looking for the next major technology Changing business scenarios, heightened
knew it. catalyst to power their business visa restrictions, and increasing customer
transformation efforts. expectations are all creating an imperative
Four key findings emerged from for the service providers to become more
our interviews Supplier management is agile. Firms will now accelerate overall
underpowered. outsourcing as they learn to collaborate
Cost reduction is back on top.
Third party ecosystems are more complex in a world where speed, quality, flexibility,
In the recent past, many people in the
than ever, which has implications for and cost are more important than physical
industry have stated that cost reduction
regulatory compliance, security, risk, location. To stay ahead in the game, service
is a secondary benefit behind other
and data protection requirements. providers will need to rethink how they
objectives, such as increasing agility or
Organizations have rising expectations provide services remotely yet effectively,
improving the quality of service. This year’s
that service providers will spearhead build plug and play solutions that can be
survey shows a sharp increase in the
their innovation agenda. COVID-19 has rapidly integrated, and have contracts
number of organizations giving priority to
put a severe strain on the supply chains that allow them to pivot as the business
cost reduction, and in the face of a likely
of organizations. All these changing situation evolves.
pandemic-induced global recession, this
dynamics have made the role of supplier
number will get higher.
management more critical than ever;
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Deloitte Global Outsourcing Survey 2020
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Deloitte Global Outsourcing Survey 2020
Outsourcing objectives
and strategies
Outsourcing objectives
Cost reduction is a primary objective
Only a minority (if anyone) would say that 80%
cost is not important in an outsourcing
deal. However, in our 2018 survey, the key 70%
objectives of outsourcing were moving
60%
away from reducing operating costs to
enabling speed to market, scaling faster, 50%
enhancing user experience, and achieving
competitive advantage. Now, cost 40%
reduction is becoming increasingly critical
30%
again with over half our interviewees
indicating that cost reduction is a primary 20%
reason for outsourcing. The impact
of COVID-19 plays a key role here: the 10%
uncertain economic environment is
0%
switching the focus back to the numbers. Cost Flexibility Speed to Access to Agility
market tools and
The providers and lawyers we interviewed processes
tell us that cost reduction is the main Cost reduction is back in vogue
reason to outsource. While they hear
their clients talk about scalability, agility, Source: Deloitte Global Outsourcing Survey 2020
technology enablement, and innovation,
they recognize that, ultimately, clients focus
on cost. Many indicated that it is easier to
measure the impact on cost than it is to “What drives the clients’ decisions is cost
articulate the benefits of scalability and
tech enablement in a way that withstands reduction. If there is no positive cost case,
forensic analysis. It is therefore no surprise
that parameters like cost to achieve, rate it will not happen. It is always about cost.”
card, and IT investments are still heavily
weighted in the down select and final Partner, Law firm, EMEA
contract award decision. Cost may not be
what drives a deal to the table, but dinner
isn’t over until the bill has been paid.
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Deloitte Global Outsourcing Survey 2020
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Deloitte Global Outsourcing Survey 2020
Robotic Process
Automation (RPA)
Successful clients are pursuing RPA for Our 2020 survey results show a clear
reasons beyond cost progression in the adoption of RPA through Overcoming
RPA continues to be a major driving force
in outsourcing solutions, but today's
outsourcing. Our interviewees are now
focused on solving the tactical challenges
implementation
challenges are more granular. Over 75 of RPA adoption, such as developing and challenges
percent of our interviewed clients are
actively considering or pursuing RPA in
maintaining a positive business case,
defining provider responsibilities, and
and building
their sourcing arrangements. In 2018 assigning data ownership. This contrasts smarter bots
we predicted that the adoption of RPA with our 2018 survey, when organizational
would continue to grow, with companies resistance, process fragmentation, and
Creating capacity by scaling RPA is
implementing automation solutions regulatory constraints were the biggest
an opportunity to invest in more
through third party providers, Centers roadblocks to the adoption of RPA.
fulfilling jobs, more flexible work
of Excellence (CoEs), or a combination
arrangements, and enhancing
of the two. At that time, 72 percent of Again, reducing costs is a key driver. The
employee experience.
the organizations in the survey had primary motivation seems to have shifted
Organizations struggling to
adopted or were considering RPA. Since with most 2020 interviewees (two-thirds)
develop a positive business case
then, organizations have progressed citing cost savings as the major driver
should expect an initial increase in
much further by “overcoming technology for RPA adoption (while our 2019 Shared
operating costs with benefits
limitations” and “improving management Services Survey showed that results had
growing slowly as the digital
awareness.” been modest), whereas two years ago it
workforce matures.
was never “top of mind.”
Outsourcing providers can add
value to organizations looking to
Savings achieved through RPA
adopt RPA; strategic discussions
> 60% savings with providers, establishing joint
40-60% savings 2% ownership, and putting in place
9%
appropriate incentive mechanisms
are crucial steps.
20-40% savings
9% Businesses that have successfully
implemented simple task-based
automation can adopt more
advanced solutions like AI; many
< 10% savings organizations are already making
53%
steady progress in the application
of intelligent automation.
10-20% savings
27%
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The road ahead for RPA
According to the 2020 survey interviewees,
RPA adoption is not just about cost
reduction. It can also free up the workforce
“RPA and AI
the biggest barrier to RPA adoption is
the inability to capture immediate value.
to focus on more strategic issues. Doing
so can lead to greater employee and
are helping
Some clients find it difficult to justify the
investment as they don’t see a positive
customer satisfaction, with subsequent
improvements in enterprise value.
us become
business case in the short-term. However,
while the current pandemic crisis makes As the popularity of RPA matures for logical
smarter, they
technology adoption an even bigger
challenge for many organizations, it offers
rule-based processes, the use of advanced
technologies like Artificial Intelligence (AI)
are our key
aggressive organizations with liquidity an
opportunity to implement automation
is also becoming widespread. According to
Deloitte’s, “Automation with Intelligence”
focus for 2020.”
programs that transform their operating survey (2019), 58 percent of respondents Head of IT Applications
models and outpace competitors lacking had already started implementing Management,
the means, or the foresight, to adjust. AI. There was higher acceptance and International engineering
Investments today are likely to produce increasing adoption of AI in companies that and services company
large scale benefits in the long-term. were using RPA. As maturity increases, this
trend is unstoppable as more and more
organizations experience these benefits.
• Organizational resistance
2018 • Process fragmentation
• Regulatory constraints
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Deloitte Global Outsourcing Survey 2020
Cloud
Top 3 digital enablers
Still number one
Almost every organization interviewed 68%
64%
claims to be “cloud first,” but many are still
55%
struggling to implement the changes to
their operating model that are required
to reap the benefits. Around 90 percent
of this year’s client participants saw cloud
as one of their primary enablers in their
outsourcing journey—a similar statistic
to 2018 and supported by findings from
Cloud RPA Single instance
our 2019 shared services survey. Yet, a ERP
surprising number of respondents cite “lack
of maturity” either in terms of solutions or As of 2019, 68% of industry leaders had employed Cloud as
operating models as being major barriers one of their digital enablers
to realizing the full benefits, particularly
around increasing scalability, improving Source: Deloitte Shared Services Survey 2019
speed to market, and reducing costs.
The COVID-19 crisis will accelerate cloud “Cost savings, transparency, faster
adoption further as traffic is pushed
off corporate networks and into the
provisioning and deployments—overall it
internet (with telco providers and network has been a positive cloud journey for us.”
architects racing to meet the challenge),
and organizations are eager to shrink Head of IT Applications Management,
their real estate portfolios management International engineering and services company, EMEA
overheads by relinquishing their
data centers.
Managing risks is a top priority cloud resilience, even if there is still the The mechanisms for risk mitigation
Data security is still the most cited concern occasional headline-grabbing outage. between client and cloud service provider
relating to cloud services. Worries on need to be stronger. Roughly four in ten of
compliance and regulation risk have Commercial concerns are predominating our interviewees articulated this need to
displaced those relating to performance over technical and operational issues. ensure they can enjoy the benefits of the
over the past two years. Terminating without significant penalties cloud with peace of mind. Providers are
remains a highly relevant issue, but more getting this message: almost all interviewed
None of our interviewees in 2020 clients are concerned about maintaining suppliers indicated that improving
mentioned concerns about performance, competitive tension and “avoiding lock-in cloud data security was their biggest
whereas almost 50 percent of the to a single supplier.” Is it agile to go all in ongoing focus.
respondents raised this issue in 2018. The with a single cloud provider, or does agility
efforts of both public and private cloud also mean managing a broad portfolio of
providers appear to have strengthened cloud options?
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Deloitte Global Outsourcing Survey 2020
standard business
processes are
seeing its adoption.”
Vice President, IT outsourcing
service provider
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Deloitte Global Outsourcing Survey 2020
Commercials and
contracts
Contracting in an age of disruption Trust? Only so much… understanding of their own business, so
Outcome-based contracting is still Only a handful of client interviewees that they can “marry” effectively, where
a distant prospect for most clients. stated their service providers had appropriate. This doesn’t mean that good
Most of our survey participants still utilize attained the outsourcing ideal of strategic procurement practice is jettisoned, and
traditional models linked to outputs or partner. This is a staggeringly low number the healthy scrutiny of solutions is spared,
more simplistic models like FTEs. This is considering that strategic partnership has but the cynicism about outsourcing-
despite a huge buzz in recent years been a term of choice for many. So, what driven innovation must go. Establishing
towards linking charges to clients’ specific has gone wrong? an enabling culture within supplier
business outcomes. management is a good place to start.
To have a partner you have to be a partner.
It seems surprising that buyers have not Much of the problem has come from an
yet abandoned a model that does so much inability to trust the other party—or more “Often when our
more for their providers than it does for specifically, for both sides to agree on what
themselves. “Implementation complexity” is a beneficial level of trust. Clients still service providers
was cited as one of the main issues by demand robust and detailed protections in
interviewees for inaction, as moving away their contracts, which focus on managing bring innovation
from simplified pricing models requires risk and cost. We believe that this focus
a more complex and robust governance will only increase due to the repercussions to us, our IT
structure. However, the resulting of the COVID-19 pandemic. Some service
performance improvements and cost providers interviewed stated that these stakeholders find it
reductions should be sufficient to justify contracts are prohibitive and restrictive,
the investment. Supporting management preventing them from operating outside difficult to shift and
toolsets have increased capability which the box and driving innovation. Both sides
will also facilitate the transition to more do agree, however, that a true strategic we are too slow at
sophisticated models, without the need for partner is able to look at mutual benefits
unrealistic investment. beyond cost. implementing.”
Modifying the pricing mechanism is a Furthermore, clients’ portfolios of service IT Sourcing Lead, EMEA
strong lever for increasing value; however, providers are becoming more complicated,
it is not the only available option, and and require management comparable
there is no “one size fits all” strategy. to looking after a portfolio of stocks.
Our survey interviewees have built up to Balancing risk and return across multiple
30 percent year-over-year productivity dimensions requires greater investment in
into their provider rate cards. This is a a robust supplier management function,
robust mechanism to drive down costs as failing to invest in this critical area
and is widely adopted across industries. can drag down the value of outsourcing
It also gives providers the flexibility to arrangements for everyone. Indeed, some
choose from a plethora of options such as service providers have characterized their
automation, offshoring, and driving process client vendor management functions
improvements to achieve the committed as “chaotic” and “purely cost-focused.”
cost savings, making it a win-win for Investment is often focused on operational
both parties. management, whereas real benefit can be
delivered by client teams comprehending
the specific capabilities of an individual
provider, combined with a detailed
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Deloitte Global Outsourcing Survey 2020
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Deloitte Global Outsourcing Survey 2020
Lessons learned
Service provider selection process Top lessons learned in outsourcing
In 2020, the top lesson learned is the need
to spend more time on the RFP or service
provider selection. As this has not changed • Spend more time in service provider
since 2018, clearly we have to question selection process
whether people are really heeding the 2018 • Use competitive bidding process
lessons from prior experiences! • Increase scope of outsourcing services
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Deloitte Global Outsourcing Survey 2020
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Deloitte Global Outsourcing Survey 2020
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Deloitte Global Outsourcing Survey 2020
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Deloitte Global Outsourcing Survey 2020
Let’s talk
Today’s disruptive outsourcing environment is filled with opportunities to enhance
innovation and market competitiveness for forward-thinking organizations. If you would
like to learn more about ways these solutions could help your own organization, or to gain
deeper insights into how other organizations are using them already, please contact us.
We would be glad to provide you a full briefing.
Authors
Michael Stoler
mistoler@deloitte.com
Miles Underwood
mileunderwood@deloitte.ch
Contacts
Mark Lade
Deloitte Consulting
Canada
+1 416 867 8364
mlade@deloitte.ca
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Deloitte Global Outsourcing Survey 2020
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