Top-performing companies are twice as likely to use managed service partners

PwC’s Accelerating Performance research* identified 11 factors that differentiate the top 20% of companies from the remaining 80%. This article focuses on being ‘transaction efficient’ and ‘boundary permeable’. Find out more about Accelerating Performance.

Transaction efficient: Top-performing companies are 1.3x more likely to reduce time and resources needed to do business inside and outside the company.

Boundary permeable: Top-performing companies are 2.1x more likely to close operating model capability gaps through managed service partnerships.

While every company needs its own distinctive capabilities, leading Australian companies are emphatically turning to managed services partners (MSPs), not just to reduce costs, but to gain access to new capabilities and technologies.

PwC’s ‘Accelerating Performance’ research* shows that the top 20% of Australian companies (based on a combination of revenue growth and profit margin, adjusted for the industry) are 2.1 times more likely to realise that they don’t need to do everything themselves and instead leverage managed service partnerships.

Top performers see managed services as value-adding not just cost-reducing

Top performers see MSPs as investments that add value, rather than pure cost-reduction exercises.

In Australia, ‘outsourcing’ might bring to mind offshoring call centres or back-office IT functions, but that’s not the way that top performing companies define managed services. They are using MSPs to provide a wide range of other capabilities, including, for example,  front-office innovation around the digital experiences of their customers.

The top 20% of Australian organisations are 5.7 times more likely than their peers to invest in managed services to close capability gaps and keep pace with technology changes. They are also 4.4 times more likely to increase their investment into MSPs.

These are among the biggest differentiating factors between top performers and other participants from Australia in our research.

^{1. Percentage of respondents from Australia who indicated ‘to a large extent’, or ‘to a very large extent’
Source: PwC’s Accelerating Performance research}

We’ve also found that Australian companies are outperforming many of their global peers in this regard, with 71% of Australian top-performing companies investing in MSPs to keep pace with technology changes and close operating model capability gaps versus 64% of global high performers.

Top performers use technology to make working with MSPs more efficient

Greater use of managed services partners can be difficult for companies that suffer from high transaction costs – the time and resources needed to get things done, both inside their own organisations and as they engage and interact with third parties.

That’s why leading companies are continuously trying to reduce their transaction costs through operational improvements and technology. By being more ‘transaction efficient’, these top performers are, in other words, making it easier to be “boundary permeable.”

Our data shows that top-performing companies are 1.2 times more likely to say they use digital operating models to reduce the time and resources needed to do business with external parties to a large or very large extent.

^{1. Percentage of respondents from Australia who indicated ‘to a large extent’, or ‘to a very large extent’
Source: PwC’s Accelerating Performance research}

Even if they decide to keep doing a function themselves and invest in digital operations to support it, top performers are clear about the operational efficiencies and gains they are setting out to achieve. Are they seeking to improve the employee or customer experience? Compliance with regulatory requirements? Cost reductions? Faster decision making?

Top performers are more likely to upgrade legacy platforms to modular systems using cloud technologies and APIs. But it’s not just the technology that needs to change - they also focus on the processes and ways of working that go along with that.

And top-tier companies understand what targets, metrics and incentives are needed to drive desired outcomes in both the short and long term, in line with the company’s transformation ambitions. 

^{* PwC surveyed 464 respondents in Australia at director level or above with anonymised responses, in November 2022, from the following industries: consumer markets; financial services; technology, media and telecommunications; industrial, manufacturing and automotive.}