Chris Argent, Director at Wavestone UK, on outsourcing industry trends

With over 25 years of experience in consulting and IT services, Chris Argent is one of Wavestone’s most senior advisors and member of the firm’s leadership team in the UK. He has worked for the UK business for over 10 years, focusing on major clients and consulting projects externally and supporting strategy-execution internally. In discussion with Consultancy.uk, Argent reflects on the state of UK’s outsourcing market, the rise of multi-sourcing and how it can provide organisations with a strategic edge, and provides his view on the key outsourcing trends that executives will face in the coming years.

UK’s outsourcing market 

Despite a small dip following the Brexit vote, UK’s outsourcing market has been growing for years, with total annual contract value even hitting record levels this year. What are according to you the main drivers for the growing appetite?
We are seeing a mixed picture in outsourcing. Traditional prime contractor outsourcing deals are less common and customers are increasingly challenging regarding supplier performance. Against this background, we are seeing the adoption of more complex sourcing approaches to support multi sourcing, efficient and effective service delivery, new technology adoption and faster service provision. 

While much is being written and said about the potential for outsourcing to strategically support product/service quality and innovation, cost reduction remains across the board the top driver for IT outsourcing among UK executives. Why is outsourcing struggling to reach this more strategic level of maturity?
While cost reduction is still a driver, customer organisations are increasingly placing a greater focus on new challenges such as digital transformation, regulation and compliance. There is increasingly a view that IT services should just work seamlessly for a competitive price. Against this backdrop, service providers are viewed as providing commodity offerings, rather than strategic business tools. 

The maturity of outsourcing operations differs strongly across industries and organisations. Based on your extensive experience in the domain, what are leaders doing better than their peers?
Leading service providers are viewed as providing more complex sourcing approaches to support multi sourcing, efficient and effective service delivery, new technology adoption and faster service provision. According to research from Wavestone, there are three types of service providers that will benefit substantially from this migration. These are:

• Software As A Service (SaaS) providers, who will leverage pre-existing, successful niches e.g. Salesforce
• Large global players, who will leverage their pre-existing global scale
• “Collaborators”, who will leverage their ability to create a combination of capabilities within a supplier ecosystem (including start up players) to meet the customers’ business needs. These Collaborators will be willing to cannibalise their own revenues in order to strengthen the long-term relationship with the customer by meeting their business needs more effectively. 

We also anticipate a fourth category of independent IT companies, capable of disrupting the marketplace and driving this agenda for customers. 

The rise of multi-sourcing, often within a broader ecosystem, is making outsourcing relationships more complex and demanding a greater need for collaboration. However, practice shows that (too) many large multi-sourced IT services programmes fail to meet their objectives. What is missing?
A properly planned and implemented multi-sourcing eco-system can offer excellent value to those who succeed in creating a genuine team environment in which suppliers are incentivised to move away from a ‘siloed’ approach to working, and instead work collectively with each another towards a common goal. The creation of an appropriate contractual agreement is fundamental to this.

Ensuring effective collaboration between all parties in a multi-sourcing ecosystem is dependent on the consideration and successful combination of many diverse themes. The right combination of these themes will vary between cases and will be dependent on programme budgets and timescales, but in all cases, will require:

• extensive prior planning, considering the need for collaboration from the outset
• moving away from an ‘us versus them’ mentality when dealing with suppliers, creating one single team from the outset of the sourcing process
• reflecting this collaborative ‘spirit’ into the contractual agreement
• upfront investment in the design of appropriate operating models and processes that are aligned with and complement the new contract structure
• establishing trust and collaborative working through the creation of a balanced and fair governance structure – seeking to create a rewarding experience for suppliers by incentivising good behaviours with a fair apportionment of risk and reward. 

At Wavestone, you lead the firm’s IT outsourcing offering. What is Wavestone’s approach to managing IT outsourcing programmes and in helping clients advance their outsourcing maturity?
Wavestone has identified the following critical success factors for running successful IT outsourcing programmes and improving maturity: 

• Robust strategy that clearly defines the objectives and targets for the sourcing programme prior to engaging in any activity
• Methodology that ensures the integrity of the process and provides a sound, auditable process for good decision-making
• Due diligence to completely understand the current physical and commercial environment
• Realistic Time-box of the response timelines and negotiations and enforcement of these dates
• Gain the trust, respect and approval of internal stakeholders through good communications
• Create a partnership process that ensures a mutually advantageous relationship with the prospective suppliers.

Trends in outsourcing

Looking ahead, what do you believe are the largest outsourcing trends executives should prepare for in the coming years?
We anticipate that the industry is on the cusp of massive change in IT outsourcing. Our view on what can be expected spans several key trends, including Anything As a Service, digital transformation and cloud services migration, process automation, agile enterprise, Internet of Things and offshoring rebalancing.

Robotics Process Automation (RPA) and Artificial Intelligence (AI) are dominating the outsourcing headlines. Could you give a concrete use case of how these could benefit organisations seeking to outsource?
Enfield Council is deploying Amelia, a cognitive agent, for frontline services. Amelia will be used to help Enfield residents find information online and fill in forms, guiding users through a chat feature on their computer screen. Any questions Amelia cannot answer will be referred to a human colleague. This is being deployed at the same time the council is transitioning outsourced IT services to Sungard Availability Services.

With data becoming increasingly dispersed across technology chains, the implementation of GDPR is set to impact sourcing relationships as well. From an outsourcing perspective, what opportunities and challenges will GDPR pose?
Many outsourcing arrangements will have already adopted privacy processes and procedures consistent with the GDPR Directive, as a normal industry practice. However, the GDPR Directive changes are far more extensive and wide-ranging compared to the outgoing regime. With a little less than 5 months to go, by now, impact assessment should have been completed to understand the risk to your organisations and implementation mode initiated. What we say to clients is that the impact assessment is actually the easy task (relative to the organisation’s own data protection maturity) but the real challenge is the implementation of change!

There are many variations of outsourcing arrangements, but we focus on two key areas:

• Contractor/ Processor arrangement; and IT Infrastructure arrangements.
• Contractor-Processor outsource arrangements.

The net result, is that the GDPR changes will likely alter the contractual relationship between Data Controllers and service providers acting as Processors. For example, article 28 of the GDPR provides a long list of obligations that the Controller will need to impose on the Processor which is a significant extension from the current Directive, and as we have seen the sanction risks associated with non-compliance far greater than ever before. 

Such clauses to be covered off in a data processing contracts may be classified into three areas:

• Clauses which impose technical and organisational measures on the processor;
• Clauses which increase the communication/cooperation between the controller and the processor;
• Clauses which allocate the risk of non-compliance in the performance of the contract between the parties. 

At Wavestone, we draw attention to the fact that the compliance risk will weigh on both the data controller and the processor respectively which will require more focus in the contract to protecting each other’s liability.

On Wavestone

In the UK, Wavestone is one of the larger consulting firms with specialist expertise in outsourcing transitions. Since 2015 the firm is part of a global consulting group with over 2,500 consultants across four continents. How does the UK team benefit from the international scale in terms of engagements and project delivery?
Wavestone is organised and managed in global domains rather than by country, as many international consulting firms are. This enables us to meet the global requirements of our clients by leveraging experience, skills and resources from across Wavestone, and combine them seamlessly. We also have access to a number of exclusive assets such as our Research & Knowledge Centre (R&KC): a dedicated in-house team of market analysts with access to a large database portfolio and international expert networks. This team analyses market data, establishes benchmarks, and adds value to our clients’ decision-making. This is a great asset to have when leading a global IT outsource project. 

Lastly, you’ve been active in the outsourcing field for over 25 years now. What makes the business so interesting and fun to work in?
I think the key word here is change. During my career, I have seen approaches to outsourcing, technologies deployed and service providers change dramatically. The pace of this change has meant that no two engagements have ever been the same and it is reasonable to assume I can look forward to more change in this dynamic field.

Related: Interview: Matilda Malmgren, Consultant at Wavestone UK.