Report reveals “poor” levels of satisfaction with outsourcing service providers
Smaller outsourcing service providers are beginning to pose a threat to the sector’s biggest players, according to Morgan Chambers’ annual research report. UK Service Provider Performance 2006, which investigated over 250 Outsourcing contracts in companies from both the commercial and public sector, reported that general satisfaction with the industry’s largest players was poor.
In particular the report claims that levels of innovation among the major outsourcing providers were, “truly shocking and lamentable” and that many providers were also afraid to shoulder reasonable risk.
With the study finding that 40% of organisations now spend over half of their functions budget on outsourcing – an area which Morgan Chambers believe is growing steadily - and that nearly a quarter of those questioned intend to outsource more in 2007, the findings are likely to act as a wake up call to many service providers.
The report warns that meeting SLAs was no longer enough to guarantee customer satisfaction and did not give providers “carte blanche” for winning repeat business. With nearly £7 billion worth of contracts up for renewal between the end of 2006 and March 2008, the Morgan Chambers report claimed that: “only those providers that have good relationships with their clients, demonstrate flexibility and innovation and can prove that they are offering is an integral part of the client’s business rather than a commodity service will have a real chance of success.”
The study asked executives to grade service providers according to performance levels relating to seven areas, ranging from their ability to meet SLAs to the way contracts were managed. According to Morgan Chambers, those providers that managed to maintain a tight focus (either by specialisation or limited services) around what they do and who they do it for managed to score highest. Wirpo topped the charts for general satisfaction with 78% while both EDS and CSC came a distant bottom with just 50% and 49% respectively.
Service providers scored lowest in the area of innovation with just five out of 16 companies scoring over the 50% cut off mark, leading the study to claim that “Innovation, or accusations of the lack of it, is in serious danger of becoming a cliché in the Sourcing market today.”
Morgan Chambers said that the list of service providers – which included Atos Origin, BT, Capgemini, Computacenter and IBM - failing to hit the 50% mark in innovation was all the more surprising given that many of these companies had huge research and development budgets.
According to Morgan Chambers, nearly 50% of those questioned rated their skills to manage service providers as weak or medium. The report also found that as the size of the contract increases, the chance that clients are dissatisfied with outsourced service also rose, a situation described in the study as “a very serious situation for the governance and long-term sustainability of large-scale and business-critical service contracts.”
Over 94% of the companies questioned used India as their major location for offshoring with a further one-third of the organisations indicating that more than 20% of their total outsourcing services were delivered from the country. The report stated that applications management was the most popular process or service sourced from the Indian sub-continent.
- Source: European Leaders Network, Monday December 11 2006