In the middle of November, ISS, IAOP Nordic Chapter and the Copenhagen Institute for Future Studies (CIFS) held ISS Business Forum: The future of outsourcing and perspectives for FM at what has been called the most effective workplace in the world, according to the Leesman Index. Namely, the ISS headquarters in Søborg. In this blog, we share the key trends and takeaways from the insightful discussions of the day.
Under a huge impact of technology, new market demands and business propositions rooted in relationships and outcomes rather than transactions and inputs, the outsourcing market is experiencing a transformative development.
Smaller contracts but higher demand
In today's outsourcing market, small to moderate-sized deals have become the order of the day, whereas mega deals are fewer. The nordic chapter chair for IAOP (International Association for Outsourcing Professionals), Katie Gove explains:
“We are seeing smaller contracts, judged by dollar amounts. But we are definitely seeing more of them. In fact, the overall pool of client organizations (those companies buying outsourcing) is growing. Outsourcing is now something that smaller organizations are using whereas 10 years ago, client organizations were mainly large companies only. So, the total contract value is larger now than it has been even though contracts themselves are generally smaller.”
Katie Gove adds;
“We understand this development to show that client organizations are stepping into the service integration role, that is, that they are assembling a portfolio of vendors and technology and are orchestrating the outcome of the environment. This is a change in the market. 10 years ago, companies were mostly buying outsourcing on a functional level in a "black-box" format. This meant that the vendor did all the integration and that there was little transparency for the client organization.”
Relationships and outcomes rather than transactions and inputs
During the business forum the ISS Head of Group Marketing, Peter Ankerstjerne, explained that another huge tendency in the outsourcing market is unquestionably that companies increasingly are moving from input-focused outsourcing models towards outcome-focused outsourcing models.
Input-focused models have traditionally been based on predetermined resources within a specific time frame at an agreed price, for example working hours and delivery.
In the coming years however, the trend shows that organisations will lean more towards service provisions based on output specifications. Using output-based outsourcing, the outsourcing company specifies what it wants, and moves the responsibility of determining how and what gets delivered to the service provider. Think about it, why dictate procedures in an area where you have decided you are deficient? It must be up to the service provider to understand how to put the supporting processes together to achieve the desired outcomes.
To make this work, closer collaboration with the client organization will be necessary. Both parties (the outsourcing organisation and the service provider) need to be willing to change and adapt both their way of thinking and practices for the common good.
Creating trust will be paramount in order to create an outsourcing success, and constant focus on mutual business transparency may very well be the way to get there.
What do you think is crucial to get success with outsourcing? Share your comments and thoughts below.