Steria: The Tailored Approach - Mark Cook
The pull of outsourcing is stronger in a weakened global economy as companies look to cut costs and ride out the storm. The growing demand for offshoring shows cost is at the top of the agenda but, as Mark Cook from Steria tells FDE, for long-term value corporates need the freedom to adjust outsourcing deals as needs change.
The motives that drive corporates to outsource have matured over time, with increased emphasis on factors such as process improvement, but the sudden shift in the world’s economic fortunes has reminded everyone that cost reduction is the prime market driver.
Now more than ever, companies want efficiency gains from third parties. In this environment it might seem logical for service providers to slash prices, but some prefer to view the growing interest in outsourcing as a chance to generate more business value for clients – not through bargain deals but better working relationships.
IT and BPO service provider Steria, which counts among its UK clients Royal Mail, BT and the BBC, is among those that recognise that cost reduction is crucial for clients to maintain margins, but that the lowest price is not an indicator of long-term value.
‘Typically, uncertain economic times encourage businesses to look harder at both value and cost. The time is ripe for providers of technology and business process outsourcing,’ says Mark Cook, Steria’s UK chief operating officer.
Cook believes that to seize the market opportunity, service providers must recognise that customers are more demanding and have much clearer ideas of what they want from an outsourcing deal. He also notes that the growing involvement of finance directors proves that outsourcing is a strategic issue that must deliver longterm benefits.
‘Finance directors are involved in all outsourcing decisions, not just those involving finance and accounting processes. There is not a single deal we are currently working on where the CFO is not involved to ensure that the project is in line with strategic goals,’ says Cook.
Maturing attitudes are particularly notable among Steria’s private sector clients, as they become better informed about what outsourcing can deliver.
‘Many private sector clients like Alliance Boots and Threshers are now in the hands of private equity, which has got us used to their black and white world where execution must be rapid and payback must come quickly. So, we’ve had to sharpen our pencils. Companies are certainly smarter about what they want, which is a big change – and a positive one,’ says Cook.
‘Other private sector customers are now rechecking their outsourcing deals. Finance directors are looking closely at bottom line and top line returns, which means there is greater clarity and sense of purpose,’ he adds.
Beyond borders
Further proof that cost reduction is driving the outsourcing market is the resurgent interest in offshoring to leverage lower labour costs. Cook sees fewer deals based on a 50/50 split between offshore and onshore service delivery.
An example is the BBC contract that Steria won two years ago. The BBC, where accountability and the need to fully justify all projects funded by the licence fee are both crucial, now has a second generation, ten-year contract with Steria, which represents its first significant move into offshoring.
‘The BBC was sticking its neck out, but it has been very sensible in balancing cost benefits with issues like data security,’ says Cook.
Steria’s presence in India allows it to offer fully offshored services, though it can equally offer 100% onshore service delivery in the UK. This affords it the flexibility to change the blend of service location over the life of a contract.
‘We need flexibility and agility in what we offer, but we are certainly seeing a more aggressive approach to offshoring. Our presence in India means we can deliver offshore, onshore or integrated solutions. Customers can turn the dial and take more offshore if they feel like it,’ notes Cook.
If service providers can offer such adaptability, corporates can not only cut costs, but also remain agile in responding to the many challenges ahead.
