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Outsourcing Management client's dominant coalition, can influence a client's propensity to contract for bundled services. However, more influential is where relationships were developed as an incumbent supplier. Strong relationships as an incumbent, where combined with a track record of service delivery, inclines a client to outsource more services to the incumbent supplier. We gave a combined weighting of 10 to four factors under the heading of client market forces and characteristics. In a highly regulated environment, the strong requirement for compliance will favour bundled decisions, on the whole. Bundled services will lower complexity, especially if the supplier offers assistance with regulatory mandates. Geography can have an effect. Bundled service options are more likely to be taken up in the lead markets of the U.S. and U.K., but more relationship-orientated cultures could now start to grow faster into bundling. We found strong propensity amongst large companies in Norway and Netherlands, for example, and also in South Korea. Additionally bundling is favoured by organisations requiring a higher level of innovation from a supplier. Here, bundling is the quid pro quo to the supplier for its innovation investment and its provision of more integrated services. There is also sector influence. For example telecoms, manufacturing, and utilities sectors take the lead on bundling, especially where a firm is based in a single region and is large buyer. Some sectors prefer industry verticals, for example U.K. military logistics in the 1990s. Thus certain sectors are to be found creating a momentum in favour of, or against, bundling. Suppliet Market Factors and Cost Effect Here we identified four factors, with a combined weighting of 18. Initial choices and incumbent vendors shape future bundling—incumbency and capability to do other services lead to client propensity to given them bundled services. This goes beyond the relationship effect mentioned above. Incumbents with additional capability shape bundled services strategy and stand to gain from these. Reinforcing this finding, a 2007 Everest Research Institute survey of BPO scope aggregation found that if a buyer initially selected a generalist supplier, 40 per cent of the time the buyer will select the same supplier for other functions. Part of this incumbent advantage relates to demonstrable additional capabilities. Indeed provider capabilities are a bigger influence than mere incumbency. Here clients look for a supplier that is widely capable across different services and able to use IT in each, offers a wide scope of service geographically, and can deal with large contract size. The few suppliers that can service large scope, bundled deals will be prioritised, but there is a caveat: a limited number of supplier options may also inhibit bundled service decisions. We identified two lesser factors under this heading. Where a supplier offering is of interdependent services then a "lock-in" effect can occur, where the client is more likely to buy the combined service, already integrated, as bundled services. Finally, external media attention given to bundled services can create a bandwagon effect, increasing a firms' propensity to look for bundled services. However, this effect can be short-lived if performance does not improve and should suppliers fail to develop dependencies between bundled services, and deliver on their promises. The area of cost is weighted 20 out of 100. Cost emerged as a constant key concern in our research, and received even more emphasis in the 2008-9 interviews. In particular, two types of costs emerged from the study, namely management and integrated services efficiencies. As we discussed above, management and [24] HRO TODAY GLOBAL | FALL 2011 transaction costs should be demonstrably lower, and integrated service efficiencies much more achievable with bundling of services. From a client perspective we suspect the transaction cost saving from bundled service purchase are large but hidden. They include typically: • Risk reduction; • Less governance; • Simpler contracting (cheaper legal costs); • Ability to move to standardised practices; • Synergies across services and processes; • Less management time getting to contract; and • Lower relationship management costs. It is possible that the transaction cost savings between a single and multiple supplier route may be substantial enough to offset where a single supplier might offer a less attractive deal on production costs, but it is likely—if the supplier is instituting the practices listed below—that these will also be lower anyway. Most large suppliers are now busy reducing their internal transaction costs (the costs of doing business with themselves), and their production costs through focussing on standardising as a shared service across all processes, the customer contact part of a process they run for a client, and likewise for its administrative back-end e.g reporting. This leaves the middle sections of a process, which tend to be more domain-specific, e.g procurement or sub-components, and here the idea is to standardise for the client globally on the relevant process and charge the client for idiosyncracies away from that standardised process. This then enables the supplier to provide a standard contract for all standardised shared services (but not necessarily the domain-specific ones). Obviously, the reduction in both transaction and production costs is large if this can be achieved across a client's several IT/BP activities. The size of this gain as passed on to the client will be one attractive aspect of bundled service purchase. Next Steps The research demonstrates clearly that the forces driving purchase decisions in outsourcing engagements are many and complex, and the scope of services in an outsourcing relationship can vary greatly, depending not least the client's prior experience and management approach to the use of outsourcing. Early results from phase two of this research, currently underway and covering the more recent past, suggest that the identified benefits of bundling IT and business services have been confirmed by a growing number of clients seeking to use outsourcing more strategically—not just to reduce cost and improve operational performance, but also to drive innovation and organisational agility by partnering more broadly and deeply with a smaller number of core providers. Leslie Willcocks is a professor of technology work and globalization at the London School of Economics. Ilan Oshri is associate professor of strategy and technology management at the Rotterdam School of Management. John Hindle leads outsourcing marketing at Accenture. This article is an excerpt from a full version of the report published by Accenture, which can be accessed at: www Research_and_Insights/By_Subject Bundled_Outsourcing/default.ht .accenture.com/Global/ m

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