Katie Gove expert view: Service outsourcing now & in the future

Katie Gove has more than 25 years’ experience in consulting and management, with focus on strategy and innovation in regards to outsourcing.

Her professional raison d’être is focused firmly on improving outcomes in outsourcing and offshoring by helping companies to focus on value, improving internal and shared processes to support better outcomes as well as building outsourcing strategies that are directly connected to business strategies.
She is an acknowledged thought leader, having spoken at the World BPO/ITO Forum in New York.
Her entrepreneurial experience includes founding Trellis in 2008 in addition to five years in venture capital earlier in her career.

During the ISS Business Forum in November, we had the pleasure to meet Katie after her presentation and get her point of view on one of her key areas of leadership and expertise: Outsourcing. Get the most important insights on outsourcing now and in the future in our interview below.

Based on your many years of experience within the field of offshoring and outsourcing, how do you think the market has changed in recent years?

In our market (Denmark), the biggest change has been that organizations have started to look at outsourcing as a strategic option. Our market is very operationally focused. Mid-level managers have budgets and staffing responsibility at a relatively larger scale than in other markets. These folks tend to make decisions at a functional/group/product level. In other markets, you see a more integrated, cross-functional decision-making pattern which is typically made at a higher level in the organization. Denmark's flatter model has a lot of advantages, primarily that in principle, it is flexible and is driven on contextual market knowledge. However, the problem is that this decision-making is often made outside of any strategic forum and can often times actually even be disconnected from the business' strategic direction.

Outsourcing and offshoring in our market got their start at operational levels. Yet they have grown to occupy significant budgets. This back-door approach drove a lot of growth in these areas that was in some ways outside the view of upper management until it got big enough to get their attention. At many organizations, upper management is now engaged in a way they definitely weren't 5-10 years ago. So, this is the biggest change I've seen.

What do you think has caused these changes? (technology, data etc.)

Two things: One is that the budgets for outsourcing are now significant; and the other is that digital transformation is moving customer interaction to digital platforms. This means that organizations must strategically leverage digital platforms to connect with and serve customers. This transforms IT from being a critical support function to being a critical business platform.

During the ISS Business Forum, you mentioned that we will see smaller contracts in the future, judged by dollar amounts, while the overall pool of client organizations will grow. Why is that and what impact will this have on the outsourcing industry?

Outsourcing is now something that smaller organizations are using where as 10 years ago, client organizations were mainly large companies only. So, the total contract value (the amount of money spent on outsourcing in a particular market) is larger now than it has been even though contracts themselves are generally smaller.

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.

We think that this is a really interesting development but it won't be easy for most organizations as it requires that they are really really good at connecting this integrated service environment to their business strategy and it requires that they are really really good at integrated governance (i.e. how each of the vendors in their portfolio should interact with each other and not just the client organization). Companies have been almost entirely focused on cost optimization and they have been quite good at developing skills in cost optimization. Companies haven't been nearly so good at developing strategic and governance skills. So, there's a big gap in ability that has to be addressed for companies to succeed in the service integration role.

What do you think are the biggest opportunities and challenges within outsourcing we are seeing in the market right now?

The company that will succeed in the 21st company is not the biggest, most vertically-integrated company. The company that will succeed in the 21st century is the company that can leverage technology, resources, supply chains and markets across organizations, both partners and vendors. Companies need to be able to master networked cooperation to deliver on business strategy. This is not only relevant for the Danish market, it's actually a make-or-break necessity for Danish organizations. Our market does not have enough resources nor support all the necessary technology to be able to compete in the global market today. We must be able to leverage resources and technology that are outside of our borders in order to win. This is not easy to do. So, the biggest opportunity is definitely the biggest challenge.

What makes up a successful outsourcing partnership and what will be more important for creating this success in the coming years?

A successful outsourcing partnership is founded on each party understanding clearly the value that the other party brings to the partnership as well as the value that they see in the relationship. There's a fair bit of humility that is necessary in a successful outsourcing relationship. While every dimension is likely governed by a contract, the successful outsourcing partnership will have instances where each party has made accommodations for the other that reflects context or exceptions.

Are you looking for more knowledge related to Integrated Facility Services? Read our blog post: How to grow business efficiency with the Integrated Facility Service model [link]. To learn more about the work of Katie Gove and Trellis, please visit the website by clicking here.

For more news about Facility Management & Service Outsourcing, please subscribe to our weekly newsletter in the right-hand column.