With most business services relationships the 'devil' is very much 'in the detail'. In order to run smoothly, today's complex outsourcing arrangements require total clarity around responsibilities, payments, penalties and expected service levels. This is particularly true in the case of more sophisticated contracts involving value-share or multi-party arrangements.
Fuelled by rapid developments in communication technology, the world economy is in the midst of a profound shift in the geographic distribution of services provision. Service users must understand the opportunities that this phenomenon offers their business and service providers must develop the correct mix of on-shore, near-shore and off-shore capabilities to help realise these opportunities.
As market growth slows in certain sectors and competitors move up the experience curve, some traditional business services activities are experiencing commoditisation. Successful players are re-focusing their value-proposition away from the simple removal of cost, towards the improvement of their client's own product offering. Strategies range from the development of consultancy services to the re-engineering of clients' entire business functions.
Corporations continue to rationalise the number of business services providers they use in an effort to streamline procurement, reduce administration costs and benefit from economies of scale. In order to meet their customers' needs for bundled services, many providers are turning to partnerships or joint-ventures, and consequently face important decisions over issues such as prime- vs sub-contractor status and the control of customer relationships.
Many business services firms have experienced extremely attractive growth rates over recent years. However, as penetration levels increase, sources of top line growth for some are proving harder to come by. Companies are looking towards expansion of their service offering, SME customers and overseas expansion to continue their upward trajectory.
Outsourcing arrangements frequently bring with them particular opportunities and challenges around workforce management and HR issues. The most successful players are those who can manage the smooth transition of workforce from client to service-provider, and motivate their workforce to provide the highest quality delivery to the end-user.