| PRESS RELEASE |
| New outsourcing survey by IACCM and Argea highlights common mistakes and unrealized advantages in outsourcing modified |
| 18-Aug-2004 |
Survey reveals common outsourcing mistakes are repeated across many different industry sectors and company sizes PRINCETON, NJ, August 18, 2004 – Argea and the International Association of Contract and Commercial Managers (IACCM) today unveiled the results of their joint outsourcing survey conducted in July, 2004. The unique partnership brought together the specialized contract management knowledge of IACCM and the outsourcing practice insight of Argea to create a highly focused survey of contract management professionals from around the world. The recently completed survey of 95 international companies was conducted to gain better insight into actual practices and experiences of companies that outsource. While the survey generally affirms that outsourcing is delivering real benefits, there was evidence that significant improvements could come from more education and improved planning, implementation and management of outsourcing projects. Three key findings stand out in the survey results. Of the major findings, the first convincingly demonstrates that outsourcing can save money and achieve efficiencies but it can also create new problems. The study found that companies which use outsourcing encounter similar problems that appear across all industry sectors and are independent of company size. In fact, most companies are only attaining incremental improvements through costly trial and error. Bill Batiste, Argea Chairman and former North American Head of Business Process Outsourcing (BPO) for Price Waterhouse Coopers, said, “I am very encouraged by the growth of outsourcing but disappointed that the failure rates are not dropping quickly. At Argea, we are very committed to helping more clients have success with more outsourcing projects.” In another finding, most respondents indicated that they rely upon internal organizational learning for outsourcing education but found dispersed pockets of expertise to be a challenge to outsourcing success. While a majority of surveyed companies turn to external resources for help with negotiating contracts, those resources often compound the problems with aggressive negotiating tactics, contractual misalignment with business goals and weak contract structure. The study suggests that companies usually wait too long to seek help from trusted advisors. Tim Cummins, Executive Director of the IACCM commented, “We recognize that contract and commercial managers can play an important role in ensuring alignment with business goals. At present, it seems that responsibilities and accountability are often not well defined. Knowledge capture and information flows are typically fragmented – and this is reflected in wasted resources, excessive post-award disputes and the failure to consistently meet goals. IACCM has been working with major vendors and users of outsourcing to diagnose these problems and implement global solutions – for example, by undertaking comprehensive on-line skills analysis and benchmarks, to identify the key gaps and address overlaps and conflicts.” Finally, too many companies in the survey use traditional and confrontational methods in negotiations and management of outsourcing suppliers. They generally lack awareness of the adversarial consequences in the outsourcing relationship. This undermines collaboration, project success and business goals. On this finding, Ram Iyer, CEO of Argea said, “A central thesis in the founding of Argea was that outsourcing should be done by collaboratively integrating the capabilities of vendors. After all, you are making the vendor a part of the value chain of your company. Create partners out of them, not confrontational suppliers, and you will see greater success”. Cummins also focused on this finding, noting that the IACCM is working to change some of the traditional practices in vendor negotiations and management by publicizing their effect and promoting alternatives that achieve superior results. Donnie Foster, EVP of Argea, who has 16 years of outsourcing experience on both the vendor and client-sides, said “Over the years I have seen the growth of outsourcing but have not seen a proportionate increase in skilled personnel across companies. The fact that 75% of the respondents did not think they had skilled resources internally to outsource effectively points to the need for more skilled advisors and implementation personnel”. This cooperative survey by Argea and IACCM has provided increased understanding and insight into effective outsourcing. Each organization is committed to assisting senior executives to meet their goals by raising the knowledge and organizational capabilities of those responsible for constructing, negotiating and managing outsourcing relationships. About Argea About IACCM Argea |