What Is The Value Of Outsourcing?

Outsourcing can have its benefits, but how often do we bother to measure the actual value of our outsourcing relationships? Or the innovation that it delivers? In Europe, at least, the answer is: not very often.


This week, Warwick Business School (UK) released a study (sponsored by Cognizant) looking at European C-suite attitudes to outsourcing. The study encompassed 250 CIOs and CFOs across Benelux, France, Germany, Switzerland, the Nordics and the UK.


The majority of respondents (70%) say they believe that innovation achieved through outsourcing contributes to their company’s financial performance, but only 35% admit to measuring the innovation that their outsourcing partner delivers.

Companies pay significant sums for the outsourcing services they receive and, more often than not, reduce their own in-house workforce as a result. It’s a little worrying then that the majority don’t actually bother to assess how much value or innovation they got in return!  Even more worrying is that this isn’t the first time this issue has been raised. An earlier study by the Warwick Business School and Cognizant in 2009 also revealed that only a minority of CIOs and CFOs have tried to calculate the financial impact that outsourcing has on their business.


The big question is why do so few companies try to measure this? It’s clear from the survey that there is a strong recognition that outsourcing can play a big part in innovation — which is something the pharma industry has been struggling with in recent years. More than 60% of survey respondents indicated that they are spending more on outsourcing partnerships than they were three years ago, and 67% of CIOs say that they seek help from an outsourcing provider to turn ideas into new and improved processes. Half of all CIOs also added that they’d be willing to pay more for an outsourced service that enables them to formalise, repeat and maintain innovation.


In a statement, Sanjiv Gossain, SV and Head of Cognizant’s UK and Ireland operations, explained: “Businesses are increasingly placing more high-value work in the hands of their partners, but by failing to measure the financial impact of the innovation delivered, it may be difficult to make the case for further investment—and further benefits to the business. There’s a fantastic opportunity to place even more reliance on these relationships, but it seems many businesses need help in measuring this impact and communicating it to stakeholders.”


I’m already in contact with some experts about this study to find out more about how companies can reap the benefits and measure the impact of outsourcing. Expect more on this in the next issue of Pharmaceutical Technology Europe, which will be available on www.pharmtech.com in May!


Published by Stephanie Sutton, PharmTech Europe on March 25, 2011 09:31 am under Outsourcing

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